AFTERPAY

Afterpay (APT.AX) is a Fintech company operating in the ‘buy now, pay later’ market offering a modern day version of the traditional lay-by purchase method – in effect a reverse lay-by system of particular appeal to millennials who wish to better manage their finances and avoid credit. Shares first purchased late 2016 at $2.80. Stock went on to double and continued to be held following a strategic investment made by U.S. venture capital firm Matrix Partners in Jan. 2018 coinciding with an entry into the U.S. market. With strong revenue growth due to signing up merchants and consumer acceptance part profits were taken at ~$12. Stock was subsequently purchased again following a re-assessment highlighted by a ramp up in activity and acceptance in the U.S. and UK markets in 2018. Despite the rise in share price to over $20 the investment case was further strengthened on news that the afterpay was being rolled out beyond online and into brick and mortar stores. Whilst the company was not immediately profitable during this growth phase forecast, strong revenue growth and execution justified forward PE valuations, underpinned by forecast earnings growth (ie. favourable PEG ratio). This measure was regularly monitored along with the company’s external operating environment.

APT is a classic example of a Peter Lynch style investment, where one could have noticed and easily tried out the product at a very early stage. One could also a have noticed broader commentary surrounding millennial’s behaviour and their changing attitudes towards money and credit.

MINT PAYMENTS

Afterpay is a more consumer oriented Fintech play, different to that of our 2011/12 success Mint Payments (MNW) which operates more as a technology enabler in the merchant’s space. This was Longvue’s first ‘10-bagger’ investment (another Peter Lynch reference who coined the phrase) MNW was an early niche play which operated in what has become a very crowded and competitive mobile payments space. Worthy of a mention as the same investing disciplines apply including the taking of profits in an constantly evolving and disruptive technology environment.