Banking Day

Zip winds up asset-backed lending

30 April 2019 6:32am

Transaction volumes fell eight per cent over the last quarter for Zip Co Ltd, small beer at an Australian fintech lender bagging decent growth in credit and other key metrics.

With 14,363 merchants at the end of the March 2019 quarter, Zip has plenty of distribution to drum up. Names in the pipeline include Chemist Warehouse, General Pants, Lorna Jane and New Zealand Super Retail Group.

Shaw and Partners, a supportive stockbroker, purred over the delights in the Zip update.

The Shaw analyst Jonathan Higgins branded the update “a cracking set of numbers with both volume and gross receivables exceeding our expectations and continuing a trajectory of strong growth, across a now sustainably positive operating envelope”.

“We have previously written that Zip is one of the fastest growing tech businesses on the ASX and this update reiterates one of the fastest growing gross profit trajectory’s in the market.”

 Key takeout’s from release:

•    revenues of A$23m, up 105 per cent, year-on-year and up 20 per cent sequentially against the previous quarter, although March volumes “were, as expected, 7.6 per cent down due to strong seasonality of Christmas period”;
•    gross receivables of $565m were up 113 per cent YoY “and as a result Zip is well and truly on track for $120m+ of revenues in FY20, against a progressively recurring income base;
•    credit performance continued to perform strongly with net BDD at 1.75 per cent; and
•    the average spend per merchant was around $20,000 within period, “with substantial checkout share growth to continue.”?
Zip’s principal difficulty is the time being taken to activate its zipMoney 2017-1 Trust, a master trust for the securitisation of some of its lending.

“Both NAB and FIIG as primary funders of the Trust [have agreed] to extend the Trust for an additional two years,” Zip’s managing director Larry Diamond said in a March 2019 quarterly update.

The terms provide for the Group to be able to sell assets into a new Zip Master Trust structure once the new program has become operational, now aimed at the final quarter of 2019.

“The Zip Master Trust structure will deliver greater scale at a lower cost,” Diamond said.

Article by: Ian Rogers

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