Shares in Australian based buy-now-pay-later provider Split-it are down 73% this year to trade at a market cap of $173 million. However, with only US$5 million in revenue and a recent CEO change, we take a look and see Should I Buy SPT ASX?

Should I Buy SPT ASX – About

Splitit is the only buy-now-pay-later plan that lets shoppers set up payment plans with their existing credit cards without interest charges or fees. The group partners with businesses to set up a ‘checkout’ portal that handles the automatic processing of payments at designated instalments typically chosen by the consumer.

The group competes in the Buy-Now-Pay-Later space with industry behemoths AfterPay, Klarna, Affirm, Z1P Group and smaller players such as Humm group and Laybuy.

Split-It Fundamentals Overview
Split-It Fundamentals Overview

The solution enables merchants to improve conversion rates and increase average order value by giving customers an easy and fast way to pay for purchases over time without requiring additional approvals. Serving many of Internet Retailer’s top 500 merchants, Splitit’s global footprint extends to thousands of merchants in countries around the world.

Should I Buy SPT ASX – Investor Sentiment

You may ask yourself, what do other investors think of Split-It shares? After surveying 298 Investors about their current SPT ASX shares sentiment: BUY-HOLD SELL, as well as their target price over the next 12-months here are the results;

SPT ASX Investor Sentiment
SPT ASX Investor Sentiment

Investors in the Prophet community seem to be pretty undecided on SPT.ASX shares, with a very even percentage of Buy-Hold-Sell between the community. The average price target was $0.42/share over the next 12-months. So let’s take a look into Should I Buy SPT ASX?

Should I Buy SPT ASX – Share Price

Investors who bought into Split-it at the height of the BNPL boom back in late 2020 have lost about 73% of their investment. The shares at the time of writing trade hands at $0.40 per share and a market cap of $186.5million.

The company has a 52-week range of $0.385 – $1.72 and currently trades around the bottom end of this range at $0.40 per share.

The group do not currently make a profit and hence do not have a price to earnings ratio. An interesting metric would be looking at the Price to Sales of this company, with revenues of US$5million and a market cap of $186.5m the group has a P/S of around 30x.

Should I Buy SPT ASX Dividend

Does SPT ASX Pay a Dividend? Splitit does not currently pay a dividend.

Whilst the company is burning more cash than it generates (free-cash-flow) the group is very unlikely to pay a dividend. I mean look at Afterpay, the group is much more advanced in their growth journey and still don’t pay a dividend.

Should I Buy SPT ASX – Peer Comparison

Splitit has been the worst-performing BNPL stock in Prophets BNPL Hypothetical index losing nearly 70% of their value. This is in comparison to the best performing share in the index being IOUPay which has gained ~48% over the same period.

Split-It is one of the smallest players in the BNPL sector in Australia, this is in comparison to behemoth Afterpay and Z1P. SPT groups TTV and revenue are significantly small when even compared to Humm group and Laybuy which trade on what seem to be better multiples when compared to the respective metrics.

Laybuy and Humm have significantly more merchants on the platform. LBY also seem to trade on a lower valuation and have more Merchants, Customers and TTV when compared to SPT. Humm groups valuation also appears more attractive on the basis that the group has ~450million of revenue and a TTV of just over $1billion.

According to a report, the BNPL industry worldwide was estimated at USD $7,320.6 million in 2019 and is expected to reach USD $33,638.3 million by 2027 at a CAGR of 21.2% between 2020 and 2027. 

Should I Buy SPT ASX – Fundamentals

Splitit shares currently trade on a pretty hefty valuation at around 20.31x sales and 3.25 x book value. The group currently makes a loss and hence does not have a P/E and a negative EPS of 0.111 per share.

SPT Share Price$0.40 per share
SPT Market Cap$186million
Dividend Yield0% (N/A)
ASX Rank#758
EPS-$0.111
NTA per share$0.16
Price/Sales (ttm)20.31
Price/book (mrq)3.25
Return on Equity-62.6%
Should I Buy SPT ASX – Fundamentals

Should I Buy Splitit Shares – Financials

Splitit ASX released their HY21 results to the market on 31st August 2021. Headline results from the group were:

  • Group revenues up 96% to US$5million from $US2.45 PCP
  • Merchant Sales Volume (MSV) of US$172.5M, up 94%
  • Gross Revenue (Non GAAP) up 79.7% to US$5.5M, with GAAP Revenue up 96% to US$5M
  • Total Merchants were up 167% to 2.8K and Total Shoppers up 83% to 566K
  • Recent innovations SplititPlus launched to accelerate further merchant adoption, plus expanded white-label product capability which represents a new and potentially highly scalable revenue opportunity in future periods
  • Credit card network grew significantly with addition of new UnionPay International partnership,
  • Strong Balance Sheet, including US$66M in available cash and US$150M credit facility with Goldman Sachs to support US$650M of annual MSV
  • Consolidation of debt facilities to reduce cost of funds and improve margins in H2
Splitit ASX Growth Metrics
Splitit ASX Growth Metrics

The company currently makes a loss of US$18.7million as of FY21 this is about 1/10th of the groups market cap and approx 3x the group’s revenue. The group’s loss per share increased by 38% in the half to 4.12cents per share.

We would caution investors to undertake sufficient due diligence on this company due to the perceived high valuations.

Should I Buy Splitit Shares – Income Statement
Splitit Income Statement
SPT Income Statement HY21
Should I Buy Splitit Shares – Balance Sheet

As you can see from the below the group has an interest-bearing debt of $60.46million, this is in comparison to available equity of $56million. The debt-equity ratio for Split-It is very high for a company of this nature at 107%.

The group have cash and equivalents of $66million, however are burning through approx $18million per year. This means the group has about 2-3 years of cash runway up their sleeve on the assumption that the groups losses do not continue to widen.

SPT ASX IPO

The Splitit IPO begun trading at $0.355 after its late-morning listing. This was a significant premium on its $0.20 initial public offering price.

The company’s heavily oversubscribed IPO saw the company raise $12 million via the issue of 60 million shares, giving Splitit a market capitalisation of $54 million.

As you can tell from the above SPT shareholders have been significantly diluted since the IPO back in January 2019.

SPT ASX – Insiders and Company Ownership

Split-It shares are owned majority by the general public at 56.4%, followed by Individual insiders and private companies at 25.5% and 17.6% respectively. This structure seems to be well aligned with companies of a similar sector and market capitalisation.

SPT ASX Company Ownership Structure
SPT ASX Company Ownership Structure

There is a reasonably high proportion of Individual Insiders on the register, however from the recent insider transactions list below you can see that very few have been buying shares over the past twelve months.

DateValueNameEntitySharesPrice
01 Sep 21+$45,000Jan KoelbleI100,000AU$0.45
30 Jun 21+$3,698,187Road The Book TrustC5,088,155AU$0.77
11 Mar 21+$42,659,317Victoria KrainI30,100,000AU$1.46
09 Feb 21-$20,334,735Alon FeitI13,861,730AU$1.47
Recent Insider Transactions In SPT ASX

One of the largest individual holders is American Victoria Krain, who bought in personally and also through her family office fund VentureVest when Splitit was just a patent. It seems like Victoria Krain has sold down a significant portion of shares since listing on the ASX.

OwnershipNameSharesCurrent Value
7.58%Road The Book Trust35,359,047$14.1m
6.2%Jason Krigsfeld28,888,941$11.6m
5.31%VentureVest Partners LLC24,742,864$9.9m
4.73%Victoria Krain22,061,723$8.8m
4.34%Alon Feit20,228,680$8.1m
4.26%Gil Don19,847,061$7.9m
Split-It Shares Top 5 Holders

Gil Don one of the Co-Founders of SPT ASX continues to hold a significant portion of shares at 4.26% of the companies float. We will continue to keep a close eye on both Victoria and Gil’s shareholdings.

Should I Buy Splitit Shares – Prophets Take

We would caution investors to undertake sufficient due diligence on this company due to the perceived high valuations and the widening loss that the group is realising.

The debt-equity ratio for Split-It is very high for a company of this nature at 107%, the group seems to be spending significantly more on marketing and expenses and it seems expenses are growing at a significantly higher rate than the company revenues. This is not what we look for in companies!

We at Prophet have time again mentioned that we are bullish on the BNPL industry investors should be careful to not blindly invest in companies just because they fall under a particular sector umbrella. We also struggle to see the value proposition of the product in comparison to what other BNPL are offering.

The BNPL industry worldwide was estimated at USD $7,320.6 million in 2019 and is expected to reach USD $33,638.3 million by 2027 at a CAGR of 21.2% between 2020 and 2027. Major companies are starting to realise the power of BNPL with Square buying Afterpay earlier this year. However, we will be staying with the largest providers of BNPL and will be staying clear of small players.

Larger BNPL players also have better network effects and word of mouth between customers and merchants which should require less marketing spend. Smaller players also risk being outcompeted quickly by larger players creating their own solutions. We see this as less of a risk for larger BNPL players.

We will be steering clear of Split-It shares for the foreseeable future, similar to Ex-CEO who only lasted ~2years. Should the incoming CEO be able to patch the holes in the ship, we may review the shares again.

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