From Jonathan Bayes, consultant Chief Investment Officer, Bentleys Wealth Advisors
Small-cap positives – Afterpay (APT) and BWX (BWX)
APT released a constructive trading statement this week that outlined a far more advanced rollout of their US payment platform than many, including myself, had expected.
In under six months since the launch in May, APT have seen 300,000 U.S consumers use the product, over 900 retailers transact using the platform, and there are a further 1,300 retailers to have signed agreements or are already integrating the platform in their business.
This is a terrific take-up, and I would simply point to the rapid rate of growth APT enjoyed in Australia post its launch, growing from 86,000 users at the end of FY2016, to 840,00 at the end of FY2017 and to now a figure of over 2.5m in Australia and New Zealand alone.
It seems American consumers are coming to appreciate APT as a sensible budgeting tool and retailers are embracing the system due to significantly higher basket sizes the APT platform generates for them.
We feel very comfortable with how APT is progressing and given the significant size advantage the U.S has over Australia, this confident initial take-up augers very well for long term growth projections, and ultimately, the equity value of APT.
We have APT management in to present to us later this month at which point we will learn more, but for now, we feel very confident that APT will be a $20 stock again during 2019.
In the case of BWX, we were encouraged about what we learned about the company today in a presentation we had from new CEO Myles Anceschi.
Sadly, we didn’t foresee the internal procurement and I.T issues that befell sales and working capital early in the new year, but we feel encouraged that the underlying brand strength and product sales across all of Sukin, Andalou and Mineral Fusion are strong and outpacing their wider categories for growth.
Ultimately, we see BWX as a very cheaply valued, fast-growing consumer products business trading on a fraction of a multiple of its peer group and relative to what should be a continuous 10%+ type annual growth rate.
For a P/E of around 10x normalized earnings on our estimates, we think the stock is terrific buying for those with a medium-term outlook, and we certainly don’t discount the idea of BWX again falling under the sights of either private equity or a larger consumer group in the coming years if the valuation doesn’t begin to rise to meet its sound fundamentals.
Elsewhere this week…
Magellan (MFG) published some strong continued fund inflows last month, and this company we feel looks sound to reach our $30 target price in the months ahead.
The U.S election outcome shouldn’t be a big deal for economic policy, but I would note that the renewed strength of the Democrats in the House does raise the prospect of a pointier edge to Robert Mueller’s ongoing investigation into collusion with Russia during the last Presidential election campaign.
The uncertainty over this situation, and Trump’s ongoing recalcitrance in relation to his campaign’s involvement or not do raise the prospect of a negative headline or two. We can add this to one of many left field risks emerging on the global investment horizon as we look into 2019.
I will try and make up for this week’s short summary with greater colour on how we see things next week.
Thursday 5pm values
| Index | Change | % | |
| All Ordinaries | 6016 | +91 | +1.5% |
| S&P / ASX 200 | 5928 | +87 | +1.5% |
| Property Trust Index | 1386 | +25 | +1.8% |
| Utilities Index | 7086 | -328 | -4.4% |
| Financials Index | 5897 | +126 | +2.2% |
| Materials Index | 11638 | +!90 | +1.7% |
| Energy Index | 10972 | -7 | -0.1% |
Thursday Closing Values
| Index | Change | % | |
| U.S. S&P 500 | 2806 | +66 | +2.4% |
| London’s FTSE | 7140 | +25 | +0.4% |
| Japan’s Nikkei | 22490 | +802 | +3.7% |
| Hang Seng | 26227 | +811 | +3.2% |
| China’s Shanghai | 2635 | +29 | +1.1% |
Key Dates: Australian Companies
| Mon 12th November | Div Ex-Date – ANZ (ANZ) |
| Tue 13th November | Div Ex-Date – Westpac (WBC), CGFB, SUNPD |
| Wed 14th November | AGM – Computershare (CPU), Medibank (MPL) |
| Thu 15th November | AGM – Platinum (PTM) |
| Fri 16th November | N/A |
