zipMoney Limited (ZML)‌

Rating: Buy | Risk: High | Price Target: $1.10

The Very Strong Trend Continues in 2Q17.

Key Information Event

Current Price ($ps) 0.79 ZML has announced another set of very robust quarterly numbers, with loan book growth

12m Target Price ($ps) 1.10

52 Week Range ($ps) 0.32 - 0.94 +47% on previous period (1Q17), number of merchants +59%, customers +88%,

TargetPrice Upside (%) 40.1% transactions +138% and, most importantly, revenues +47% to $4.2m (vs. $4.9m for entire

TSR (%) 40.1% FY16), with the company ending the quarter with cash of $12.1m (net$11.1m).

Reporting Currency AUD Next share price catalyst: 1H17 result in February 2017 (date TBA).

Market Cap ($m) 189.6

Sector Information Technology Highlights

Avg Daily Volume (m) 0.1

ASX 200 Weight (%) 0.01% Loan book/receivables up 47% in 2Q17 to $87.7m (FY16: $40.7m), an impressive

Fundamentals result above Shaw's $85.6m estimate - repayment profile was a robust (and improved) YE 30 Jun (AUD) FY16A FY17E FY18E FY19E 11% (of period opening book; vs. 10% in 1Q17) vs. historical 9%, with reported arrears Sales ($m)4.3 20.5 22.5 24.8 of 1.5% (FY16: 1.4%) (>60 days with write-offs >180 days) and bad debts of 1.2% (vs.

NPAT ($m) (7.1) 0.9 2.0 2.4 1.3% in 1Q17; vs. FY16: 1.1%), well below industry averages of 3-5%.

EPS (cps) (2.9) 0.4 0.8 1.0 A standout feature was the very healthy bounce-back in Transaction volumes after a

EPS Growth (%) 89.0% 113.4% 113.4% 19.5%

DPS (cps) (AUD) 0.0 0.0 0.0 0.0 flat 1Q17, delivering +52% increase to $50.2m, +6% above Shaw's $47.5m estimate -

Franking(%) 0% 0% 0% 0% equating to an average monthly run-rate of nearly $17m per month, vs. previous two

Ratios quarters (4Q16/1Q17) monthly run-rate of ~$10m. We expect this monthly quantum to YE 30 Jun FY16A FY17E FY18E FY19E continue. The Top 10 merchants represent 38% of volumes (vs. 51% in 1Q17), P/E (x) (21.7) nm 96.3 80.6 supported my merchant growth of 59% to 2,152. From January 2015 to December

EV/EBITDA (x) (29.0) 52.6 38.2 34.6 2016, Shaw notes that ZML have now transacted over $140m, with strong growth

Div Yield (%) 0.0% 0.0% 0.0% 0.0% evidenced in the SMB segment.

Payout Ratio (%) 0.0% 0.0% 0.0% 0.0%

Price Performance

YE 30 Jun 1 Mth 2 Mth 3 Mth 1 Yr

Relative (%) (1.0%) (9.5%) (11.0%) 76.6%

Absolute (%) (0.6%) (6.5%) (6.5%) 91.5%

Benchmark (%) 0.4% 3.0% 4.5% 14.9%

1.0

0.9

0.8

0.7 Both the loan book and transaction volumes growth fuelled revenue growth of +47%

0.6 to $4.2m and $7.3m for 1H17 - vs. only +6% revenue growth in 1Q17.

0.5

0.4 Customers surged 89% from ~63,000 to ~120,000 - new merchants signed up during

0.3 the quarter including what we believe to be some (potential) very significant

Jan Mar May Jul Sep Nov opportunities from the likes of Lux Group, Catch of the Day, Michael Hill and Solahart.

S&P/ASX 200 Index ZML Recommendation

Price performance indexed to 100 Source: FactSet

Reiterate BUY. This was one of ZML's best performing quarters with virtually no issues,‌

Major Shareholders concerns or problems. At this rate of momentum, we are likely to be upgrading our Larry Diamond(CEO & MD) 26.5% numbers again at the half-year result in February. With the capital raising executed, and Peter Gray (COO & ED) 8.7%

Adam Finger (CIO) 3.7% significant (potential) upside in the short-term from both the Pocketbook acquisition, and

Liquidity Group 2.9% further monetising the large recent wins with Henry Schein JV, Co-Op, etc., ZML is also

VPC 2.4% investing in its business to quicken its penetration across the 4 core areas of Travel, Retail,

Heath and Education, and stave off any competitive threats that may loom from the likes of Certegy (ASX: FXL), GE (Latitude), and Afterpay (ASX: AFY). The company is clearly enunciating a strategy of differentiating itself qualitatively, strategically and visibly vs. what we consider to be its lower quality peers like Openpay, Ourpay, Oxipay and Afterpay, which all offer a homogenous platform with little distinction. Additional expansion capital will support new product development, nabbing larger merchant partners, beefing up the

DannyYounis | Senior Analyst sales and marketing (group headcount now ~80, with staff costs of $2.9m earmarked for

+61 2 9238 1292 3Q17), and pushing into NZ (registered there) to thereby accelerate the company's growth

dyounis@shawandpartners.com.auprofile. Fundamentally, ZML is a very attractive investment prospect as it continues to

disrupt (and monetise) the digital payments space. ZML has a strong and proven

MatthewJohnston | Associate Analyst management team (and Board, strengthened further with Megan Quinn recently) with

+61 2 9238 1311 over 70 years' experience in retail finance, payments, investment banking and fintech, and

mjohnston@shawandpartners.com.au is a low capex business with sustainably high margins.

zipMoney Limited Information Technology‌‌

FactSet: ZML-AU / Bloomberg: ZML AU

Financial Year End: 30 June

Key Items Data

Recommendation

BUY

Risk

HIGH

Price ($ps)

0.79

Target Price ($ps)

1.10

52 Week Range ($ps)

0.32 - 0.94

Shares on Issue (m)

241.6

Market Cap ($m)

189.6

Enterprise Value ($m)

215.8

TSR (%)

40.1%

Valuation NPV Data

Beta

1.40

Cost of Equity (%)

13.7%

Risk Free Rate (%)

5.3%

Terminal Growth (%)

3.0%

WACC (%)

7.3%

Investment Summary (AUD)

EPS (Reported) (cps)

FY15A

(25.8)

FY16A

(2.9)

FY17E

0.4

FY18E

0.8

FY19E

1.0

EPS (Underlying) (cps)

(25.8)

(2.9)

0.4

0.8

1.0

EPS (Underlying) Growth (%)

89.0%

113.4%

113.4%

19.5%

PE (Underlying) (x)

(0.9)

(21.7)

nm

96.3

80.6

EV / EBIT (x)

(8.8)

(26.5)

59.1

41.5

37.2

EV / EBITDA (x)

(11.1)

(29.0)

52.6

38.2

34.6

DPS (cps) (AUD)

0.0

0.0

0.0

0.0

0.0

Dividend Yield (%)

0.0%

0.0%

0.0%

0.0%

0.0%

Franking (%)

0%

0%

0%

0%

0%

Payout Ratio (%)

0.0%

0.0%

0.0%

0.0%

0.0%

Profit and Loss (AUD) (m)

FY15A

FY16A

FY17E

FY18E

FY19E

Sales

0.4

4.3

20.5

22.5

24.8

Sales Growth (%)

975.8%

376.8%

10.0%

10.0%

EBITDA

(0.3)

(6.0)

4.1

5.6

6.2

EBITDA Margin (%)

(74.6%)

nm

20.0%

25.0%

25.0%

Depreciation & Amortisation

(0.1)

(0.6)

(0.4)

(0.4)

(0.4)

EBIT

(0.4)

(6.6)

3.7

5.2

5.8

EBIT Margin (%)

(94.5%)

nm

17.8%

23.0%

23.2%

Net Interest

(0.1)

(0.5)

(2.3)

(2.3)

(2.3)

Pretax Profit

(0.5)

(7.1)

1.4

2.9

3.5

Tax

0.0

0.0

(0.4)

(0.9)

(1.0)

Tax Rate (%)

0.0%

0.0%

(30.0%)

(30.0%)

(30.0%)

NPAT Underlying

(0.5)

(7.1)

0.9

2.0

2.4

Significant Items

0.0

0.0

0.0

0.0

0.0

NPAT Reported

(0.5)

(7.1)

0.9

2.0

2.4

Cashflow (AUD) (m)

FY15A

FY16A

FY17E

FY18E

FY19E

EBIT

(0.4)

(6.6)

3.7

5.2

5.8

Payments to Suppliers

(0.4)

(3.9)

(16.4)

(18.0)

(19.8)

Receipts from Customers

0.4

4.3

25.6

28.2

31.0

Tax Paid

0.0

0.0

0.0

0.0

0.0

Net Interest

(0.1)

(0.5)

(2.3)

(2.3)

(2.3)

Depreciation & Amortisation

0.1

0.6

0.4

0.4

0.4

Other

0.4

6.2

(4.0)

(5.1)

(5.5)

Operating Cashflow

0.0

(0.5)

6.6

8.0

9.1

Capex

(0.7)

(1.4)

(0.6)

(0.7)

(0.7)

Acquisitions and Investments

0.0

0.0

0.0

0.0

0.0

Disposal of Fixed Assets/Investments

0.0

0.2

0.2

0.2

0.2

Other

0.0

0.0

0.0

0.0

0.0

Investing Cashflow

(0.7)

(1.2)

(0.4)

(0.5)

(0.5)

Equity Raised / Bought Back

0.0

15.2

0.0

0.0

0.0

Dividends Paid

0.0

0.0

0.0

0.0

0.0

Change in Debt

4.0

28.3

0.0

0.0

0.0

Other

(2.3)

(35.8)

(7.2)

(7.2)

(7.2)

Financing Cashflow

1.6

7.7

(7.2)

(7.2)

(7.2)

Net Change in Cash

0.9

6.1

(1.0)

0.3

1.3

Balance Sheet (AUD) (m)

FY15A

FY16A

FY17E

FY18E

FY19E

Cash

1.0

7.1

6.1

6.3

7.6

Accounts Receivable

0.1

0.1

0.3

0.7

1.5

Inventory

0.0

0.0

0.0

0.0

0.0

Other Current Assets

0.0

0.0

0.0

0.0

0.0

PPE

0.0

0.1

0.1

0.1

0.1

Goodwill & Intangibles

0.8

1.5

2.4

2.4

2.4

Investments

0.0

0.0

0.0

0.0

0.0

Other Non Current Assets

2.8

39.5

43.4

48.7

54.5

Total Assets

4.8

48.3

52.3

58.1

66.1

Accounts Payable

0.3

3.9

4.2

4.4

4.7

Short Term Debt

0.0

0.0

0.0

0.0

0.0

Long Term Debt

4.0

32.3

32.3

32.3

32.3

Income Taxes Payable

0.0

0.0

0.0

0.0

0.0

Other

0.7

0.4

0.2

0.2

0.2

Total Liabilities

4.9

36.6

36.6

36.9

37.1

Total Shareholder Equity

(0.2)

11.7

15.7

21.2

28.9

Ratios

FY15A

FY16A

FY17E

FY18E

FY19E

Net Debt / Book Equity (x)

(14.9)

2.2

1.7

1.2

0.9

Net Debt / EBITDA (x)

(9.8)

(4.2)

6.4

4.6

4.0

Company Description

zipMoney Ltd. engages in the providing of consumer financing and payment processing services. The company was founded on June 24, 2013 and is headquartered in Sydney, Australia.

Price to Earnings (x) - NTM

600

500

400

300

200

100

0

-100

-200

-300

-400

Jun14 Nov14 Apr15 Sep15 Feb16 Jul16 Dec16

zipMoney Limited

Source: Shaw Research

Contacts Page

Equities

Head of Equities

Mike Ryan

+612 9238 1527

mryan@shawandpartners.com.au

Research

Head of Research

Martin Crabb

+612 9238 1352

mcrabb@shawandpartners.com.au

Executive Assistant

Melody Matthews

+612 9238 1299

mmatthews@shawandpartners.com.au

Banks, Insurance, Telecoms

David Spotswood

+613 9268 1115

dspotswood@shawandpartners.com.au

Annabel Riggs

+613 9268 1147

ariggs@shawandpartners.com.au

Diversified Financials, Strategy

Martin Crabb

+612 9238 1352

mcrabb@shawandpartners.com.au

Elliot Smith

+612 9238 1293

esmith@shawandpartners.com.au

Technology & Online, Contractors, Retailers

Danny Younis

+612 9238 1292

dyounis@shawandpartners.com.au

Matthew Johnston

+612 9238 1311

mjohnston@shawandpartners.com.au

Life Sciences, Travel

Darren Vincent

+612 9238 1269

dvincent@shawandpartners.com.au

Matthew Johnston

+612 9238 1311

mjohnston@shawandpartners.com.au

Metals & Mining

Peter O'Connor

+612 9238 1219

poconnor@shawandpartners.com.au

Oil & Gas

Stuart Baker

+613 9268 1148

sbaker@shawandpartners.com.au

Real Estate

Peter Zuk

+612 9238 1211

pzuk@shawandpartners.com.au

Small Caps

Andrew Moller

+612 9238 1256

amoller@shawandpartners.com.au

Income Strategies

Cameron Duncan

+612 9238 1544

cduncan@shawandpartners.com.au

Steve Anagnos

+612 9238 1513

sanagnos@shawandpartners.com.au

Institutional Sales

Chris Eldridge

+613 9268 1185

celdridge@shawandpartners.com.au

David Erskine

+613 9268 1061

derskine@shawandpartners.com.au

Phillip Janis

+612 9238 1503

pjanis@shawandpartners.com.au

Rob Pizzichetta

+613 9268 1174

rpizzichetta@shawandpartners.com.au

Sam Kanaan

+612 9238 1275

skanaan@shawandpartners.com.au

Scott Coventry

+612 9238 1363

scoventry@shawandpartners.com.au

Equity Capital Markets

John Bowie Wilson

+612 9238 1253

jbowiewilson@shawandpartners.com.au

Grace Belsito

+612 9238 1226

gbelsito@shawandpartners.com.au

Corporate Finance

Head of Corporate Finance

Geoff Carrick

+612 9238 1339

gcarrick@shawandpartners.com.au

Damian Rigney

+612 9238 1398

drigney@shawandpartners.com.au

David Kells

+612 9238 1362

dkells@shawandpartners.com.au

Edward Loneragan

+612 9238 1283

eloneragan@shawandpartners.com.au

Greg Bittar

+612 9238 1597

gbittar@shawandpartners.com.au

Max Smouha-Ho

+612 9238 1268

msmouha-ho@shawandpartners.com.au

Robert Hallam

+612 9238 1594

rhallam@shawandpartners.com.au

Jeremy D'Sylva

+612 9238 1239

jdsylva@shawandpartners.com.au

Sydney | Head Office

Level 15, 60 Castlereagh Street

Sydney NSW 2000

Telephone: +61 2 9238 1238

Fax: +61 2 9232 1296

Toll Free: 1800 636 625

Melbourne

Level 20, 90 Collins Street

Melbourne VIC 3000

Telephone: +61 3 9268 1000

Fax: +61 3 9650 2277

Toll Free: 1800 150 009

Brisbane

Level 28, 111 Eagle Street

Brisbane QLD 4000

Telephone: +61 7 3036 2500

Fax: +61 7 3036 2599

Toll Free: 1800 463 972

Perth

Level 14, 197 St Georges Terrace

Perth WA 6000

Telephone: +61 8 6188 7643

Fax: +61 8 6188 7607

Toll Free: 1800 636 625

Adelaide

Level 21, 25 Grenfell Street

Adelaide SA 5000

Telephone: +61 8 7109 6000

Fax: +61 2 9232 1296

Toll Free: 1800 636 625

Buy

Expected to outperform the overall market

Hold

Expected to perform in line with the overall market

Sell

Expected to underperform the overall market

Not Rated

Shaw has issued a factual note on the company but does not have a recommendation

Risk Rating

High

Higher risk than the overall market - investors should be aware this stock may be speculative

Medium

Risk broadly in line with the overall market

Low

Lower risk than the overall market

RISK STATEMENT: Where a company is designated as 'High' risk, this means that the analyst has determined that the risk profile for this company is significantly higher than for the market as a whole, and so may not suit all investors. Clients should make an assessment as to whether this stock and its potential price volatility is compatible with their financial objectives. Clients should discuss this stock with their Shaw adviser before making any investment decision.

Disclaimer

Shaw and Partners Limited ABN 24 003 221 583 ("Shaw") is a Participant of ASX Limited, Chi-X Australia Pty Limited and holder of Australian Financial Services Licence number 236048.

ANALYST CERTIFICATION: The Research Analyst who prepared this report hereby certifies that the views expressed in this document accurately reflect the analyst's personal views about the Company and its financial products. The Research Analyst has not been, is not, and will not be receiving direct or indirect compensation for expressing the specific recommendations or views in this report. As at the date of this report the Research Analyst does [not] have an interest in the financial products of the Company.

DISCLAIMER: This report is published by Shaw to its clients by way of general, as opposed to personal, advice. This means it has been prepared for multiple distribution without consideration of your investment objectives, financial situation and needs ("personal circumstances"). Accordingly, the advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not the advice is appropriate for your personal circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of your Shaw client adviser. This report is provided to you on the condition that it not be copied, either in whole or in part, distributed to or disclosed to any other person. If you are not the intended recipient, you should destroy the report and advise Shaw that you have done so. This report is published by Shaw in good faith based on the facts known to it at the time of its preparation and does not purport to contain all relevant information with respect to the financial products to which it relates. Although the report is based on information obtained from sources believed to be reliable, Shaw does not make any representation or warranty that it is accurate, complete or up to date and Shaw accepts no obligation to correct or update the information or opinions in it. If you rely on this report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Shaw disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence. This publication has been prepared in accordance with Shaw's Research Policy. A copy of the Policy can be found at www.shawandpartners.com.au.

DISCLOSURE: Shaw will charge commission in relation to client transactions in financial products and Shaw client advisers will receive a share of that commission. Shaw, its authorised representatives, its associates and their respective officers and employees may have earned previously, or may in the future earn fees and commission from dealing in the Company's financial products.

Sydney | Head Office

Level 15, 60 Castlereagh Street

Sydney NSW 2000

Telephone: +61 2 9238 1238

Fax: +61 2 9232 1296

Toll Free: 1800 636 625

Melbourne

Level 20, 90 Collins Street

Melbourne VIC 3000

Telephone: +61 3 9268 1000

Fax: +61 3 9650 2277

Toll Free: 1800 150 009

Brisbane

Level 28, 111 Eagle Street

Brisbane QLD 4000

Telephone: +61 7 3036 2500

Fax: +61 7 3036 2599

Toll Free: 1800 463 972

Perth

Level 14, 197 St Georges Terrace

Perth WA 6000

Telephone: +61 8 6188 7643

Fax: +61 8 6188 7607

Toll Free: 1800 636 625

Adelaide

Level 21, 25 Grenfell Street

Adelaide SA 5000

Telephone: +61 8 7109 6000

Fax: +61 2 9232 1296

Toll Free: 1800 636 625

Zipmoney Ltd. published this content on 25 January 2017 and is solely responsible for the information contained herein.
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