@edgescape I saw your straw on noticing the Smartpay terminal at a Chatswood restaurant. It's funny that you've noticed that as I've noticed lots of small businesses and especially cafes adding a surcharge to any card transaction whether it be a tyro, westpac or commbank terminal. I'm not even talking about an automatic surcharge, they literally add up the order on the cash till and then manually input a higher value on the eftpos machine. I think because they do this already there is a good change the shop could even sneak in a slightly higher margin into the sale regardless of not having to directly pay SMP anything. How is a customer to notice an extra 1% but an extra 1% on $10k transactions, 7 days a week adds up over a year. ($36,000?!?)

Anyway...

Thought there was also a cool opportunity on the website to refer a business. Seems like a pretty easy process to sign up and refer businesses. Might buy some shares and start asking every business in my neighbourhood if they want to save some money on merchant fees and take my $100 referral bonus on each signup. Also cute that this payment is processed by $EML.

If I can personally get 100 businesses to sign up then there's $10k for me to invest back into SMP and a few hundred thousand in extra revenue for SMP to pay me back as a dividend. All tongue in cheek here but not the worst investment strategy.

After listening to the @Noicewon pitch the other day, I've slowly gone away and researched this stock. It's an interesting one, but I'm going to play devil's advocate a little and present some bearish questions I have about the business. If anyone can help (doesn't have to be Reece), I'd be glad to hear.

1. SMP is currently trading at ~6x trailing revenue. TYR is closer to 8x. This doesn't strike me as particularly cheap, especially considering TYR has gross margins of almost 50% compared to SMP 20-25%. Why are the gross margins so different? Is there any reason we expect these to converge in the future?

2.  @Noicewon noted in his comments on the ann report that they brought forward some depreciation expenses and this contributed to the annual loss. D&A has been fairly steady since 2018 at roughly $3M p.a. so is there any reason we expect this to be less going forward.

3. I'm not sure what a realistic net margin would be for SMP (it will likely increase as the number of terminals installed grows), but if they can continue top-line growth of 30%, in 5y they will have revenues of $120M. If we assume they manage to achieve EBIT of $12M (10% net margin), that puts them on a 15x FY2026 EBIT multiple, which seems in the range of "normal". Thus, the current valuation already prices in a fair bit of future growth. 

So, for those of you that think SMP is attractively priced, have I made any logical / valuation errors? Are my assumptions around growth and margins too conservative, and if, why? 

That's my bad @Hands. I misunderstood. That is great news in regards to them integrating WeChat and Alipay into the app. I do wonder whether this would deter anyone that are worried about the privacy concerns with those systems, but it seems as though this would be mitigated by the fact that someone would be going through the Smartpay system who would store the data. I think it widens the customer base of SmartPay considerably and it is a great advantage that they have been able to negotiate these sort of deals. Not a lot of people probably know about this integration (or I may just have been blind to it) and I think it adds value to the stock with the number of people who use WeChat or Alipay that could be pushed to use these businesses that have SmartPay terminals.

One risk I would point out, to add another side to things is the fact that other terminal companies could easily strike up deals with WeChat or Alipay and that could take away some advantage from Smartpay. Another advantage of someone like HICAPs or Tyro is that they have the ability to run through HF cards and therefore can be used in health care businesses. I imagine the space will begin to change as Afterpay is integrated into Square and we find out what advantage businesses will have for selecting a Square terminal over another type in terms of running through Afterpay purchases. 

I am guessing as I am not a business owner using SMARTPAY that it would operate as other terminals do where they say (sign) this incurs a % surcharge when using just as one sees with VISA, MASTERCARD, AMEX etc. You then tap and the invoice includes the surcharge. Clearly SMARTPAY is resignating with businesses as they are growing market share. I am guessing that if businesses thought customers felt this was an issue, they would not be using SMARTPAY. I think the thing to remember is just because another companies terminal charges the business and not the customer it would be naive to think they are not passing this cost onto the consumer through their product pricing, as such, I actually see this as a more transparent option for the consumer. With such a small market share and impressive growth characteristics it definitely is not the worst Small Cap one could invest and I think its a nice short to medium term play as the realistic TAM might not dictate this to be a long term hold.