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#Media Release
Added a month ago

Novatti issued a media release today announcing a partnership with Datamesh Group to integrate their POS terminal solutions with Novatti’s acquiring payment system.

https://novatti.com/wp-content/uploads/2022/12/20221214-Novatti-partners-with-DataMesh-to-provide-cutting-edge-card-present-payment-solutions.pdf

A bit more on Datamesh group here:

https://www.datameshgroup.com/ 

https://www.afr.com/street-talk/datamesh-raising-at-115m-valuation-nab-tipped-to-corner-round-20220912-p5bhap

This will allow Novatti to offer physical payment receipt terminals as part of their acquiring offering. There should be some minor commercial benefits to this over time as the existing customer base take on the terminals as it should increase the overall transaction value that Novatti is handling.

The bigger upside is this partnership builds off previous one’s such as the partnership with Riskified to continue to improve their product differentiation in a very competitive market.

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#Analyst Report
Added a month ago

Below is a recent analyst report on Novatti. It’s quite comprehensive and worth a read for those interested.

https://novatti.com/wp-content/uploads/2022/12/MST-Access-NOV-Update-8Dec22.pdf

Disclaimer: This report has been commissioned by by Novatti Group Limited and prepared and issued by Glen Wellham of MST Access in consideration of a fee payable by Novatti Group Limited. MST Access receives fees from the company referred to in this document, for research services and other financial services or advice we may provide to that company.

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#ASX Announcements
Added 3 months ago

RADI Licence

After many years Novatti’s application for the restricted authorised deposit-taking institute licence has been approved. The announcement was also followed by an investor presentation that can be seen here:

https://youtu.be/HzrTwcfEoPs

The licence means that Novatti can start operating its new banking business International Bank of Australia.

https://iboa.com.au/

The banking business will focus on two key areas of the market where they believe there is an unmet need in the sector. The first is b2b offering payment services to fintech companies similar to Novatti. Novatti will also become a customer of the bank, using them to provide banking infrastructure(i.e settlement services at a cheaper rate than their current providers. This gives Novatti benefits two fold, increasing margins for Novatti and providing revenue for IBoA.

Guy stated the time waiting for approval was used to grow their tech stack and develop the go to market strategy, having Novatti systems to use as a test case. This will allow them to scale in the b2b sector much more rapidly.

The second is for b2c services for international based customers looking to come to Australia and easily move money between countries prior to entry to Australia. Examples of the target customers are international students and migrants. As part of the restricted licence IBoA are currently unable to provide services to the general public, with the current target timeline for first accounts going “live” in around 6 months and receiving full ADI status within 12 months. 

IBoA will start increasing its marketing over the next several months in preparation for this timeline and leveraging off Novatti’s existing business network.

Novatti have also increased their ownership in the business to 91% through a further $5m investment and while this will impact Novatti’s cash balance, IBoA will start funding their own expenses which are currently ~$750k a quarter.

All in all this is a significant step forward in Novatti’s long term strategy and it will be interesting to see what the next big goals are now that IBoA and the AUDD stable coin have now been launched.

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#Quarterly Review
Added 3 months ago

The Good:

  • Expanding range of services and offering with the addition of services such as MYPINPAD tap and pay services, Riskified fraud protection.
  • Operational cash burn decreased to -$2.04m for the quarter. Still a way to go for cash flow break even but heading in the right direction.

57e888ac598fbbcce98fa57436fc86cfb00e3f.jpeg

The Not So Good:

  • First quarter of decreased revenue from $11m to $10.5m. Not a bad sign as this is the first instance but a warning sign going forward.
  • No changes to restricted banking licence status. (Note: This was announced after the quarterly)


What To Watch:

  • Further improvements in cash flow heading toward operational cash flow break even within 12 months.
  • AUDD launch in November and how this is integrated across the rest of the Novatti ecosystem
  • EMoney Issuing licence application
  • Singapore major payment institution licence application


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##Business Model/Strategy
Added 3 months ago

And they have strategic holding in Rekon (RKN), which seems like a platform to integrate paymets into small business SAAS at a point?

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#Business Model/Strategy
Added 3 months ago

IBoA - International Bank of Australia

I think the banks name is perfect for capturing the, as they say neglected “migrant market”. Once they receive their European banking licence they will be able to pick up migrants from Europe before they even step on Australian shores just as China Pay will hopefully do with the Chinese students. One example they can begin using is directing their Vasco Pay users in Spain who are after banking solutions in Australia to automatically start a Novatti bank account.

They seem to have a well thought out plan developing, adding and building out systems and capabilities that they can leverage off to maximise the banks success.

The RADI is a start now it’s time to work towards the ADI where they can really maximise what they have put in place.

note: I hold IRL and SM.

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#Banking License
Added 3 months ago

Well, the license has come through (see here) -- exactly as CEO Peter Cook told us it would when we spoke with him in August (see here).

It's always hard to differentiate between management hubris and reasonable expectation! Anyway, shares are up 70% on the news -- Could've, would've, should've...

And that's not entirely unreasonable, given how central this was to the company's strategy.

I'm of the view that payments is ripe for disruption -- the current systems are slow, expensive and cumbersome. Even the services that have a decent UX are built on top of ancient legacy systems.

And, yes, I'll even say that I think Bitcoin (the network) will likely play a dominant role. I mean, an open source protocol that offers superior security, costs, speed and trust, on which anyone can build and integrate into their own product? c'mon! (a rant for another day perhaps).

What's less certain is to what degree Novatti will 'win' in this fast evolving space. Sure, the legacy banks aren't as nimble and forward looking, but should they shift their focus that'd be formidable competition. End then you have the likes of Block, Strike etc -- big US tech with super talented people and lots of funding.

Anyway, there's probably enough opportunity for a good number of early movers to benefit from this structural shift. So am happy to maintain my small position for now.

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#ASX Announcements
Added 3 months ago

It seems APRA has approved their restricted licence. Note: IBoA is the name of the Novatti Bank.

https://www.apra.gov.au/news-and-publications/apra-grants-new-restricted-authorised-deposit-taking-institution-to

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#ASX Announcements
Added 3 months ago

Novatti was placed in a trading halt today.

Based on the chatter on Hot Copper, it seems that they have finally been successful with their application for the restricted banking licence (RADI).

Whilst I am not expecting it to have a material impact on profitability in the short term, I am keen to see how management plan on using it to shape the future direction of the company. With a share price of 18.5c and current market cap of $62M, surely the share price can only go up from here.

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#ASX Announcements
Last edited 3 months ago

Novatti Sept Quarter Results:

It seems slow and steady for NOV with more time required to see if they can really exploit their relationships. Still waiting on that RDI Bank Licence as they work towards achieving a cash flow positive status (Mar -4.35; Jun-2.28; Sept -2.04).

The company reported these highlights.

 $10.5m quarterly sales revenue – up 98% YoY

 Quarterly processing revenue up 123% YoY

 Remain confident of progress on restricted banking licence

 Shift to monetisation phase continuing

 New services continue to move into commercialisation phase

 Acquiring, Issuing and Cross Border customer bases and revenues increasing strongly

 Quarterly cash requirement decreases another 10%

 $14.5m cash available with further $12.8m expected shortly.

Full report can be found in the link below.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02590927-3A606009?access_token=83ff96335c2d45a094df02a206a39ff4





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#ASX Announcements
Added 5 months ago

Email to investors and interested followers of the business:

Good morning,

I’m pleased to announce that $10.5m in new funding has been committed to support the continued delivery of Novatti’s growth strategy.

As flagged in our June quarter update, Novatti has been considering ways to unlock further growth funds, including by leveraging its assets to avoid shareholder dilution.

To this end, the new funds will be raised through a corporate bond issue and will particularly support growth in Novatti’s core payment processing business as well as providing capital for its proposed banking business, for which we remain confident of progress being made in securing final licence approvals.

The bond has been fully subscribed to by institutional investors, which highlights the strength of Novatti’s existing business and future prospects.

In addition to these new funds, and following recent updated guidance from Reckon Limited, the special dividend that Novatti could expect to receive from its stake in Reckon is circa $12.5m. Importantly, these new funds do not detract from our focus on becoming cashflow positive.

You can read more details about the bond in Novatti’s full ASX release by clicking below.


June Quarter Update: https://novatti.com/wp-content/uploads/2022/07/FY22-revenue-exceeds-32m-as-Q4-cash-use-falls-48.pdf

Alternative Interview from 9th August, 2022: https://www.youtube.com/watch?v=oZhavkCq6UU

Further information: https://novatti.com/wp-content/uploads/2022/08/MST-Access-NOV-Update-4Aug22.pdf

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#CEO Meeting
Added 6 months ago

Thanks @Strawman for lining up the interview with Peter Cook. Andrew tried to dig down into what makes Novatti different and this is what I was hoping to get from Peter. He did keep his responses fairly high level but did provide a few insights for me to look further into.

Some takeaways from the interview:

  • After restricted licence approval, NOV is obligated to deploy first services within 6 months of approval, then targeting the full bank licence within 12 months. Peter noted that any revenues during the restricted phase are unlikely to be significant.
  • The launch of AUDD stable coin across the stellar, ripple then ethereum networks is a key focus for the company short term, with the focus then shifting to integration into their existing platforms and payments ecosystems.
  • Future acquisitions would be targeted at expanding operational and licencing footprints in the B2B space. Not interested in acquiring technology specifically. Businesses would need to be cash flow positive or close to it.
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#CEO Meeting
Added 6 months ago

Thanks @Bradbury for suggesting Novatti -- it seems like a really interesting company.

Just a few quick notes from the meeting (recording will be up shortly).

The business has grown revenue at 76%pa, on average, over the last 5 years. Or about 50% if you only look at organic growth.

MD Peter Cook said that they were currently on a $4m+ per month run rate, so about $50m per year (compared to $32.5m for FY21).

So, taking that at face value, you have a business that is on a forward Price-to-sales of 1.4x. Further, one with $14m of cash (post Reckon dividend), and that is focused on hitting CF breakeven in the near term. Even under the current burn rate they have an 18 month runway.

While payment processing is the lion's share of revenue, you have a few new initiatives that look set to come on line in the coming year or so. The stablecoin initiative is fascinating, and I think there's a legitimate use case there -- but it's a fast evolving space and I'd consider this aspect of the business as very speculative at this early stage.

At any rate, given all of that, Novatti looks dirt cheap. PROVIDED they do indeed maintain sales momentum, pivot to CF+ and manage to scale effectively. On that last point, Peter did mention the attractive economics you see in payments companies when they do hit scale, so hopefully he's focused on seeing that realised.

And I personally have no doubt that Peter is right when he talks about the digital transformation of payments. Whether or not Novatti ends up doing well, this is space that is going to change very rapidly over the coming decade -- So i think he's right to point to massive industry tailwinds.

The harder part is understanding Novatti's chances of winning in a competitive space with lots of notable players. Peter said that it's not all about cost but increasingly functionality -- that is, their customers want to make and receive payments, but these need to integrate into existing ERP systems. And worth remembering too that half their customers are other payment providers, so it's not that all players in payments are competing with each other.

He was also at pains to point out the competitive advantage afforded by the licensing regime, as well as their various partner agreements (eg Visa, Apple Pay etc). Obtaining the banking license, which seems more like a question of when, not if, will be a good advantage.

Anyway, i'm missing a lot here, but just writing down a few thoughts while it's still fresh. I might take a small watching position on Strawman.

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#Quarterly Review
Added 6 months ago

@NewbieHK has already summarised the key points in the announcement. Not too much new in there to dig into.

The Good:

  • FY22 Revenue of $32.5 inline with my forecast of $33m & $11m sales revenue for Q4. Slightly lower growth rate than expected, however still a record quarter.
  • Reduction in cash burn down to -$2.3m for the quarter, with $6.06m in cash and a further ~$8m expected from the Reckon dividend. If NOV can continue to reduce cash outflows, there should be plenty of cash left to reach positive cash flow within FY23.

406b9e3280dfbbc5410ba8aa53d9c1a2098046.jpeg

  • Integration with Reckon has started to generate revenue. This has only been live for just over a quarter. No figures were given, however early traction is a positive indicator.


The Not So Good:

  • No changes to restricted banking licence status. Still an ongoing drag on cash flow.


What To Watch:

  • Increase / maintain organic growth rate next quarter ~ $50m rev for FY23 an achievable target.
  • Ongoing cost control / reductions.
  • How sector revenue is split in the annual report.
  • Launch of AUDD on stellar network
  • Progress of EMoney Issuing licence in Europe (Ongoing)
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#ASX Announcements
stale
Added 6 months ago

A solid announcement by Novatti. As Mr Cook said last quarter that expenses peaked and moving forward they were aiming to reduce costs. Todays results support this effort showing a 48% cash burn reduction. That aside lots of good stuff…

  • $32.5m in annual sales revenue – increasing 97% on FY21 
  • 76% average annual revenue growth across past five years 
  • $11m in quarterly sales revenue – highest ever and up 121% YoY 
  • 48% decrease in cash use in June quarter on previous quarter
  • $8m+ new cash expected from RKN Special Dividend in near term to add to $6.1m end of quarter balance


Aside from the financials there is lots to like about all the things they are building out.

Full announcement here…

https://novatti.com/wp-content/uploads/2022/07/FY22-revenue-exceeds-32m-as-Q4-cash-use-falls-48.pdf

disc: held

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#Reckon Sale of APMG Business
stale
Added 8 months ago

Reckon has announced the sale of its accounting practice management group for $100m. As 19.9% owner, Novatti will end up with ~$7m to $8m in cash post sale. 

Going forward, Reckon will focus on the cloud business where Novatti has integrated its payments platform. 

With the transaction expected to take around 3 months, the special dividend is well timed and will give Novatti a further 6 months of cash runway limiting how much debt they may need to take on to cover operation costs. (Based on Q3 cash flow). At this point in time based on previous updates the company should be getting close to cash flow break even.

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#Finnies 2022
stale
Added 9 months ago

Novatti is nominated as a finalist for two categories in the 2022 FinTech Australia  Finnies. 

Link

The ceremony is on 23-06-22, so we will find out how they go then. Not sure how much stock I really place in industry awards but any recognition is good for the brand.

In 2021 they took out best Fintech Payments Provider so maybe they can go back to back in the payments field.

077c6b749388417b31dad16617f37d79860c18.jpeg

39b96cdb4747d2d876b5a04c5e1782bd098430.jpeg


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#Quarterly Review
stale
Added 9 months ago

Report

The Good:

  • Significant revenue growth for the quarter - 79% QoQ including the ATX revenue. Well ahead of my previous estimates, but inline with the assumed organic growth rate over the quarter. Main driver was the addition of ATX.
  • $3.6m of revenue for ATX vs $3m FY21 according to the acquisition presentation. (LINK) Need to explore this further on if its how it has been reported or if there has just been massive growth in FY22.


The Not So Good:

  • Corporate cost control is mentioned, and staff costs have remained at close to the last 18 months average of ~40% of cash receipts, but product manufacturing and operating costs have jumped to around 78% of cash receipts compared to the 18 month average of ~68%. Which carrying forward does not have NOV entering positive cash flow territory in the foreseeable future. 

21666cb0f4d9516714ad1efb64b839a3f91d78.jpeg

  • In my previous post I was expecting cash outflows to taper off slightly, but instead they have increased to $4.4m. With only $8.36m in cash that is barely getting NOV through into FY23.


356464ff1831fa47fa14074023e4c8ea23310e.jpeg

  • Looking to leverage assets for future collateral needs, which is good in the fact that it is not further diluting shareholders, but in an environment of rising interest rates, management will need to watch how heavily they rely on this.
  • No changes to Banking License status. Ongoing drag on cash flow, and reforecast date for investment funds expires in June.


What To Watch:

  • Maintaining 8-10% organic growth each quarter, particularly now initial boost from ATX integration has passed.
  • My revised target ~$33m in total Rev for FY22
  • Compare RKN & NOV FY22 results to try to determine if there has been any contribution of Reckon income to overall revenue.
  • Keep corporate and admin costs level / dropping for consecutive quarters.
  • Switching over to full acquiring licence solution to be live by June
  • Customer acquisitions for Verv & Emersion
  • Progress of EMoney Issuing licence in Europe
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#Presentation
stale
Added 10 months ago

Peter Cook has been pounding the pavement carrying out an investor relations interview with ACB News which is a Chinese language business news site in Australia.

The slides from the presentation are here. These are pretty much the standard slides that have been attached to most market announcements / updates. What does provide a bit more information is the transcript from the interview on the ACB website here. (English version is at the bottom of the page)

Peter provides some updates around ChinaPay and other segments but also states that the business is aiming to be cash flow positive in 12 to 18 months. 

Having a bit of a look at this, and assuming they reach this point at the end of FY23. At Dec 21 the company had $13m in cash available or 4.6 Qtrs at the current operating cash outflow of $2.8m (including $676k of Reckon dividends).

If they can get this down closer to the $2m mark for the upcoming Q3 update it will indicate that they should be able to nurse cash balances along until the cash flow positive target date.

But. This does not account for any investing spend and I doubt that ATX will be the last bolt on acquisition, it also does not allow for any further growth in business. What we will likely see then is a capital raise once the banking licence is finalised or the company holding off hoping for some share price appreciation before another raise. (Last raise was carried out at $0.55)

The company has had a fair amount of justified negative sentiment recently given the delays to the banking licence and ongoing cash burn, so there needs to be some decent news over the next few months to swing momentum. Peter states at the end of the interview that in 5 years he'd like to see Novatti as a multi billion dollar company. I will let that one slide for now, however if big pumpy statements like that keep popping up in the future it will be a bit of a warning sign for me.

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#Reckon Integration Live
stale
Added 10 months ago

Yesterday Novatti announced that the Novatti payments platform has been integrated into the Reckon One accounting software platform with a new invoicing app that is ready for launch.

Announcement (Side note - Reckon always seem to provide much clearer, more detailed announcements. Here)

As the platform is ready for launch, there should be a contribution to Q4 revenue from this agreement. The transaction fees are currently at a reduced rate to try to encourage uptake and the revenue will be split 50/50 with Reckon.

To get an indication of what this could look like, I have used the following scenario:

Total Customers - 114,000

Customer Online Payment Revenue - $35,000 (Based on median small business revenue in 2018 - $118,000 & 30% Online payments)

7c0ca5e434263aec135538abf6e4a7deff5cf9.jpeg

Uptake - 5%

Fee - 1% Split 50/50 (Standard acquiring fee 1.75% From Novatti website)

2f9041adbf065c5989179aa74f35def9e5431e.jpeg


This results in $997,500.00 for Novatti, which is not a massive increase (~4%) to overall revenue which I was forecasting for the full year at around the $25 million mark prior to this announcement. This will be a key area to keep an eye on at the release of the Q4/H2 results to get an early indication of uptake.

What is encouraging is that there is indication of the two companies looking at further integrations across their offerings. Potential for similar revenue splits would be an attractive alternative to Reckon to replace their current providers and Novatti would also benefit from this with their 20% ownership.

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#Movement at the station?
stale
Added 11 months ago

Novatti have been pretty light on details with their ambitions with Reckon with vague general statements like 'continuing discussions on servicing the needs of Reckon customers'. Reckon have done more than Novatti to provide a level of comfort that there is something of substance in the works in their Investor Roadshow Presentation. It may not be something that provides any significant contributions to revenue in the near term, however it does timestamp a target window for the launch of Novatti payments within the Reckon platform.

LINK

7e9748503e241ad8002bfb2196c904394168f8.jpeg

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#Research Summary
stale
Added one year ago

I have held Novatti for a while in both Strawman and IRL but was not able to fully articulate what they do and the core elements of their business, so decided it was time for another dive to rectify that.

What Does Novatti Do?

Novatti is an Australian based fintech company that focuses on billing and digital payments which listed on the ASX in January 2016. Originally starting with a focus on payments and billing, Novatti has continued to grow its business to provide a wider range of digital payment technologies and describes its business activities across five verticals: Issuing, Acquiring, Processing, Billing and Banking. There is overlap between these across some of the business divisions as each of the elements are linked in the payment processing chain.

Issuing is where a customer is provided branded physical and digital prepaid Visa cards through Novatti and Vasco Pay. Novatti is working to expand its offering in this area through partnerships with other fintech platforms. Examples of these are implementing Marqeta’s prepaid card launch in Australia, providing payment cards for Afterpay in New Zealand and Visa payment cards for Cryptopay.As Novatti continues to expand licensing and approvals across more regions, it is expected this segment of the business will continue to grow through further partnerships. In FY21 the issuing business had a revenue of $935k up from $100k in FY20.

Acquiring allows businesses to accept payments online and through point-of-sale. Previously Novatti provided this service through a third party, however in early November, Novatti announced that they had been awarded principle acquiring licences from both Visa and Mastercard. The image below from the Mastercard website shows where the acquirer sits in the payment processing chain.

47ceddb50e533619dc781ffa4a66ba350cdd02.jpeg

 In FY21 the Novatti did not generate any revenue from providing acquiring services, however in the Q1FY22 update it was stated that this business is now live and generating revenue.


Where Novatti currently generates most of its revenue is from Payments and Billing services. This amounted to $15.5million in FY21, up from $10.8million in FY20.

Billing services are provided under the Basis2 and Emersion platforms which focus on utilities (Simply Energy) telcos (Telstra, FibreMax) and other service providers. Emersion launched in the US in March 2021 to expand into a larger global market.

Some of the services that are under the payments banner are the Flexewallet business, recent acquisition Malaysian based ATX,  cross border payments with Ripple partnership in Philippines and Thailand and the recently launched Verv in Europe. Novatti also provides the technology and at times taking ownership positions for other payment platforms such as LITT, Lifepay (25%) and RentPay (2.5%) developed for Rent.com.au. 

Novatti holds a 70% interest in Novatti B Holding Company (NBHC) which will form Novatti’s banking division. Currently NBHC is awaiting approval of its restricted banking licence from APRA, which was previously targeted for November 2021. Series A Investor funding is pending the licence approval by the end of February 2022.

In September 2020, Novatti launched Digital Payments accelerator program to foster and grow new payment technologies, e.g. working with University of Victoria on multi-crypto payment gateway patents. 

Outside of its core business, in June 2021, Novatti raised funds to acquire 19.9% of ASX listed accounting software provider Reckon, to open up access for synergies between platforms and access to Reckons customer base. Beyond that , the ownership stake provides Novatti with a position in a profitable growing business that has been paying a regular dividend.

Management

The board of directors has a range of experience across the payments industry, in particular CEO Peter Cook and Paul Burton. The recent addition of Abigail Cheadle onto board of directors and chair of Audit and Risk committee brings strong experience working with companies in Asia and along with increasing diversity of the board.

Directors hold around 11% interest in the company which provides alignment with shareholders, however several of the directors along with the COO & CFO have significant options at lower than the current share price.

Opportunities / Catalysts

Outside of general tailwinds from ongoing growth in the digital payments market, there are several catalysts over the short term which have potential to add value to the Novatti business.

First is the launch of the banking business which will add to Novatti’s payments ecosystem. Novatti have been preparing for this for the last several years and should be able to hit the ground running once licences have been granted which is expected to be announced this quarter.

Second is the ongoing expansion into new regions and markets through acquisitions and partnerships. The recent ATX acquisition allows Novatti to expand their presence in South East Asia, building on their partnerships with Ripple in Thailand and the Philippines. Novatti also has a pending application for an E-Money licence in Europe, which will allow them to provide digital payment services.

The third area where there could be a boost to short term revenue is if the investment in Reckon has some outcomes that allow Novatti to incorporate into the Reckon platform. In the September quarterly update it was announced that discussion had begun, however all updates around this to date have been fairly light on specifics.

Valuation

Refer to Valuation Straw.

Risks

The digital payments market is a highly contested segment with competitors typically competing on fractions of fees of transactions. There are some barriers to entry in terms of the range of licences required to provide a full range of services, however even with this there are alot of players in the space. This includes large international competition that provide a full suite of integrated acquiring and payment technologies i.e Stripe, Paypal and have bigger budgets to compete on the technology front.

Novatti also historically has high levels of cash burn and that has continued into FY22 with a negative cash flow of $3.8 million in Q1. Novatti has been direct with their growth strategy of investing in a payments ecosystem, however unless those elements start to generate capital they drag down the profitable sections of the business. With a current cash reserve of approx $13.5m, this will be a key area to watch as another capital raise could be on the cards in CY22 if cash flows are not improved.

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Valuation of $0.350
stale
Added one year ago

21-12-21 Update

Revised FY22 Price Target:

Revenue:

Use current Revenue of $19.6m based on previous for quarterly announcements 

For FY22 revenue assume 10% growth each quarter on Q1 Revenue of $5,300,000 

Add in $1,500,000 revenue for ATX (50% of FY21 Revenue)

Total - $26m (Previous estimate $27.5m)

Shares on Issue

Increase to 335,000,000 at end of FY22

P/S Multiple:

Currently trading on P/S multiple of ~4.95. This has been decreasing based on recent uncertainty with the approval of banking licence and capital raises. Use a P/S of 5 for forecast until further updates have been provided by the company. (Previous valuation used P/S - 7)

= Market Cap of $130m & share price of $0.39

Enterprise Value:

Current market cap of $96.95m

Remove cash balance of $13.465m (after ATX acquisition)

Remove value of Reckon holdings $20.7m

Leaves an Enterprise value of $62.7m and a current EV/S of 3.2

To remain conservative use EV/S of 3 for forecast, maintain current value of Reckon and assume cash balance of $4,500,000 at end of FY22

= Market Cap of $103.2 & a share price of $0.31


Average the two valuations and result of $0.35 

My price forecast is significantly down on my previous forecast of $0.61. This is mainly driven by a change in the multiple used and Novatti are doing quite a bit of work in the partnerships they have in place to continue to grow revenue streams, however until these further develop the lower multiple is likely safer to use going forward.

The lesson to be taken from this change is to be more conservative in my approach to allow an additional margin of safety as I recently added to my position IRL at 0.33 before revising my valuation.


October 2021

Rough FY22 Price Target: Assume in FY21 will maintain Revenue growth of 50% to $27.6 million based on expanding revenue sources. Using P/S multiple of 7 from industry average (source: nabtrade) Gives market cap of $193.2 million & price of $0.61 Some items to explore further for impacts on price target - Establishment of Banking Business - Impact of Reckon ownership

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Valuation of $0.900
stale
Added one year ago
News today from Novatti of their purchase of ATX a Fintech out of Malaysia (top 50 start ups) with revenue of 3m and EBITDA of 0.6m (normalised) at a price equal to 2.5x normalised revenue for a price of 8.4m made up of cash and script (0.55c) shows they continue to make acquisitions which build out their payments ecosystem and addressable market. If the market is happy to value them at around 45c on 16.5m in revenue giving them a market cap around 140-150m then today’s 3m on top of their growth target of 50% gives us revenue of 27-28m. So assuming that same 9x revenue valuations remains which I think it should considering it’s growth projectory we are looking at a 75-80c unit price. Add on the pending RADI bank licence and 90c seems to me to be a justifiable valuation (280-300m/mc).
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#Index Addition
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Added one year ago

NOV to be added to the S&P/ASX All Tech Index from Sept 20. 

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#Bull Case
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Added one year ago

NOV's Principal Activity is the provision of payment services by way of financial transaction processing, subscriber billing, card issuing, merchant acquiring services and payment network integration.

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#Partners APT in NZ 29/4/21
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Added 2 years ago

Afterpay partners with Novatti in New Zealand

Highlights

  •  Afterpay partners with Novatti for delivery of payment cards in New Zealand
  •  Leverages Novatti’s Visa partnership and recent new licences in New Zealand

Novatti Group Limited (ASX:NOV) (Novatti or Company), a leading digital banking and payments company, is pleased to announce that it has been selected by Afterpay for the delivery of its payment card program in New Zealand.

Afterpay is an Australian fintech company listed in the S&P/ASX 20 that has revolutionised the way that consumers pay for goods and services. It has grown into a leading international player in the Buy Now Pay Later (BNPL) sector, with over 14 million active customers globally.

 As part of this new partnership, Novatti will leverage its licence with Visa to enable Afterpay to issue Visa card solutions. This includes enabling Afterpay’s users to access Afterpay-branded payment cards in their digital wallet for use at participating merchants across New Zealand.

The initial agreement is for three years. Novatti will receive project setup, monthly recurring and, dependant on the take up of the service, transaction-based fees.

DISC: I hold APT & NOV

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#USA Launch 30/3/21
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Added 2 years ago

Emersion launches in US ahead of strong forecast market growth

Highlights

  •  Subscriber billing and payments platform, Emersion, completes next step in international expansion with on time launch in US
  •  Full SAAS model expected to result in high-margin, recurring revenues from each new customer
  •  Launch comes ahead of strong forecast growth for key US market segments, including the accounts payable automation market, expected to reach US$4b by 2025
  •  Emersion going from strength to strength having achieved continuous revenue growth in each quarter since Novatti’s acquisition in April 2020

DISC: I hold

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#ASX Announcement 17/3/21
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Added 2 years ago

Novatti’s fintech underpins record-breaking hybrid social media platform LITT

Highlights

  •  Novatti’s fintech is underpinning LITT’s innovative hybrid social media platform by providing members access to Visa Prepaid cards
  •  Highlights increasing convergence between social media and fintech platforms, as payments and transactions are placed at the centre of users’ daily life
  •  LITT’s recent $1.5m record equity crowd source funding raise highlights strong interest in this sector
  •  Revenues for Novatti based on leveraging the existing digital banking and payments ecosystem while continuing to increase B2C exposure

.....

This announcement follows some of Novatti’s other recent growth-focused achievements, including:

  •  Supporting innovative fintech platform Lifepay to move to a full commercial launch( 4)
  •  Record half-year sales revenue of $7.35m, up 49% year-on-year, highlighting consistent, long term growth(5)
  •  New record quarterly sales revenue of $3.79m, up 52% year-on-year(6)
  •  Novatti’s Visa Prepaid cards now being supported by Apple Pay(7)

(4) Novatti ASX Announcement – Lifepay moves to commercial launch – 16 March 2021

(5) Novatti ASX Announcement – Half year update and Appendix 4D – 25 February 2021

(6) Novatti ASX Announcement – Another quarter of record revenue as investment in platforms delivers growth – 29 January 2021

(7) Novatti ASX Announcement – Novatti’s Visa Prepaid cards now supported by Apple Pay – 22 January 2021

Disc~small holding

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#ASX Announcement 24/2/21
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Added 2 years ago

Lifepay taps into Novatti’s ecosystem to launch new B2C fintech platform

Highlights

  •  New, innovative fintech platform, Lifepay, launched leveraging Novatti’s technology and licences
  •  Enables users to manage daily life transactions, personal and social finances from a mobile device
  • Lifepay has agreed a Series A fundraising with a pre-money valuation of $20.5m
  •  Novatti’s 25% shareholding, pre Series A funding, followed a technology and services contribution, and implies a valuation of $5.125m

Disc; I have small holding

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#Bear Case
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Last edited 2 years ago

Bear Case

Looking at Novatti's financials (FY19-20 Annual Report) I'm getting a much different view than some of the ones already posted.
 

•Revenue has increased 31% yoy

•Net loss has more than doubled yoy

•Cash flow negative -$2.763M

•Less than 1 years cash runway suggesting another capital raise is on the near horizon

•Negative shareholders’ equity

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