The Earlypay Ltd (ASX: EPY) share price is down more than 7% after its institutional capital raising.
What’s happening to the Earlypay share price?
Earlypay has come back to trading after carrying out an institutional capital raising to raise almost $19 million.
This money is going to be used to fund new trade finance product expansion. This new product will enhance the company’s offering and support small and medium enterprises (SMEs) with a financing option for purchasing inventory.
Earlypay said it expects to generate a pre-tax return of more than 20% on the $18.857 million raised which would add to earnings.
The company also said it’s anticipating the commencement of a new $50 million warehoue facility in the near term, to further support the expansion of this product.
Earlypay explained that the expansion into trade finance builds on the record lending volumes Earlypay is experiencing in its established products.
Profit guidance
Earlypay reconfirmed its FY21 guidance of underlying profit (NPATA) of at least $8.5 million and expects NPATA to be approximately $12 million in FY22, which doesn’t include the net returns of this new trade finance product.
Management comments
Earlypay CEO Daniel Riley said: “Earlypay has continued its strong momentum in the 2021 calendar year, with its new trade finance product garnering significant demand from new and existing clients. Importantly, we expect the capital raise and product expansion to be earnings accretive in FY22.
“The performance of the new trade finance product, combined with our record business lending volumes in established products, has provided strong validation for the board to endorse in a capital raising to support the new business pipeline while a proposed $50 million warehouse facility to support the trade finance product is established.”
Summary thoughts on Earlypay and the share price
Management clearly seem to be feeling positive about the future.
I’m not sure if the stock is worth pursuing, the lending space is not a sector that I usually look at. But any business that can make profit might be interesting to look at.
However, there are ASX growth shares that I am looking at.