Buy now pay later provider (BNPL), Laybuy Group Holdings Ltd (ASX: LBY) will debut on the Australian Securities Exchange (ASX) today.
As per Laybuy Group’s ASX announcement on 4 September, the company has successfully raised $80 million through the issue and transfer of 56,775,165 shares at a price of $1.41 per share.
Will the share price jump higher on its initial day of trading?
What does Laybuy Group do?
Laybuy is a BNPL provider which, according to its prospectus, holds a “market leading position in New Zealand and growing presence in Australia and the United Kingdom”.
Its platform enables customers to purchase and receive goods/services upfront, while allowing them to split their payment over six automatic weekly instalments. Users are not charged interest, however, a late fee may be applied for missed payments.
Merchants benefit by receiving the full purchase amount upfront less a fee (percentage of the value of purchase). Currently, Laybuy is offered by over 6,100 merchants including names such as JD Sports, Cotton On, Typo, Pretty Little Thing and boohoo.
At the end of August, Laybuy had 542,000 active customers, an increase of around 15% since the end of June.
Why is Laybuy listing on the ASX?
According to its prospectus, Laybuy’s reasons for listing on the ASX include:
- Raising funds to support its expansion into the United Kingdom;
- Increased brand profile from becoming a listed entity;
- Allow existing shareholders to realise part of their investment; and
- Fund general working capital requirements.
One reason Laybuy shares might jump higher on debut
We will soon find out how Laybuy trades, but there is one key reason why it might trade higher when it officially lists at midday today.
Although Laybuy has not yet achieved profitability (and may never do so), it appears inexpensive compared to its BNPL listed peers on one metric: Enterprise value/revenue. Laybuy advised within its prospectus that based upon its issue price of $1.41, the company trades on an indicative enterprise value/revenue metric of 12.3x.
According to Yahoo Finance, Afterpay Ltd (ASX: APT) trades on enterprise value/revenue of 48.32x, Openpay Group Ltd (ASX: OPY) 19.02x and Zip Co Ltd (ASX: Z1P) 22.67x.
Although it could easily jump higher on debut, I do not believe Laybuy has a sustainable competitive advantage, so I will not be a buyer at this point.
