@GazD those metrics look impressive. This is outside my wheelhouse…but I’m curious to understand how Cash NPAT differs from Statutory NPAT or Underlying NPAT.

I looked it up. Latitude Group defined it as “Cash NPAT is a non-IFRS performance measure used by the Group and the investment community to benchmark underlying performance. It is calculated by adjusting statutory profit for certain non-business -as-usual items such as amortisation of acquisition intangibles, amortisation of legacy transaction costs and other items associated with the acquisition, disposal and closure of businesses.”

So I guess you need to take a good look at the financials to see what has been taken out or what has been added in.

The analysts are forecasting a loss of $13.6 million this year before returning to profit in 2024. They expect to see good free cash flows this year before returning to outflows in 2024. The free cash flows look quite lumpy.

There’s also the debt. The revenue has been growing but their debt is growing also, increasing from 2810% of equity to 4070% of equity over 5 years. This type of business basically resells debt at a net margin (hopefully positive), so you would expect to see debt rise as revenues rise. At the 11th March 2023, their net profit margin was -11.5% according to data on Simply Wall Street. That’s a worry as it appears on the surface to be losing money on the money it borrows.

I guess you really need to understand the business and how it makes a profit, or intends to make a profit. They engage in fintech lending which sounds fairly risky at the moment. It probably depends on how many of the fintechs they are lending to are making a profit, or how many of these have positive free cash flows to service their debt.

I might have this completely wrong because I don’t really understand enough about the business.

I’m not trying to be negative on the stock, just highlighting some things to look out for.

Cheers,

Rick