FY22 NPATA upgraded to $14m from $13m - but stat NPAT will be circa $12.5m because of a $1.5m amortization. There are now 279.668m shares on issue which translates to a 4.47c eps. Dividends stated to be 60% of NPATA or 3c ff dividend

I'm tipping a 1.5C ff INTERIM dividend upon declaring half yearlies - ex date mid March.

Yeah! I'm not sure the headline grabbing FY21 +50% is as good as it sounds - particularly when you take into consideration the extra 44m shares issued on 1st July - from my take, the register now has 277.846m shares with 10m unlisted options.

?So the underlying NPATA for FY21 was $8.7m with a non cash amortization charge of $1.5m giving us a stat NPAT of $7.2m (rounded)

?There will be another $1.5m amortization charge this year (FY22) as well.

?Let's work this through

?NPATA of $8.7m x 1.5 = $13m less the amortization of $1.5m = stat FY22 NPAT of $11.5m or an eps of 4.14c and I would suggest a 3c divvy which grosses to 4.28c

Still @ 46c and with an in demand financial product suite and likely further growth + corporate play prospects + good grossed up dividend, its worthy of a hold.

Earlypay (EPY) offers three B2B products which are very much in demand in these tougher pandemic times – Equipment finance, Invoice factoring and Trade Finance. Not only will cash strapped businesses be interested in these offerings, so will most importers as they struggle to stump up extra cash to ensure more goods are on the seas and in the supply-chain given the longer & more costly shipping schedules.

Yet over the past year Earlypay has not only changed its name (previously CML Group), it has changed the entire dynamic of its business model. When buying a smart technology system called Skippr, it has radicalized its ‘modus operandi’ with not only substantial time savings on approvals which has been the driving force behind some 80% of new clients in FY21. And, it also reflects on its cost structures.

The FY21 results reflected this as follows (% against revenue):

FY21          FY20

Product Interest & Commissions

22.06%      27.03%

Employee Costs

30.49%     35.31%

Overheads (incl marketing)

23.93%     30.23%

As a consequence, this is how the bottom lines shaped up:

FY21         FY20

EBIT

23.53%     7.44%

NPAT

16.5%       5.62%

And what of the future?

Well, the company is expecting 40% growth in NPATA which translates into a bottom line FY22 eps of 3.8c, based upon current share son issue after the June cap raise. Though it is likely the company will do yet another cap raising in FY22 as this is the lever of growth in this industry - part cap raising and additional finance lines, so they are conducive to eps growth.

Finally, don’t overlook the possibility of a takeover. In 2020, it was subject to a bid by Scot Pac at 60c when it didn’t have the bells and whistles which it does today. Plus, back then, COG launched a scrip and cash offer. It still has a 17% stake in EPY so the embers are still flickering.

Conclusion: A growth company with an in demand offering and which also has a few past suitors out there.     

I suspect the worry some may have about bad debt with EPY is overstated because trade credit insurance policy covers 90% of the debt over $5k so we don't have much risk of a wholesale slaughter via bad debts...besides the LVR is less than 60%.