A leading fund manager has identified the ASX share Smartpay Holdings Ltd (ASX: SMP) as a small-cap opportunity.
The Wilson Asset Management (WAM) investment team likes the outlook for the financial technology company, which is one of Australia and New Zealand's largest independent full-service EFTPOS providers.
Smartpay says it services more than 30,000 merchants with more than 40,000 secure and feature-rich EFTPOS terminals. In New Zealand, it's the largest direct connector of EFTPOS terminals to Paymark, the central electronic payment processing platform.
Recently, the ASX share provided a trading update so let's have a look at some of those numbers.
Sales recap
Smartpay said its Australian acquiring transactional revenue for the three months to 31 March 2023 was up 76% year over year, while the Australian total transaction value was up 64% year over year. The company reported consolidated revenue was up 54% year over year.
The business said ts full trans-Tasman network of terminals is now over 46,000.
During the three months to March 2023, it added another 1,200 new transacting terminals in Australia while seeing continued stability in its New Zealand terminal fleet.
Smartpay also reported it has entered into a non-binding letter of intent with its Australian processing partner to "unlock the strategic value" of its NZ fleet of over 30,000 terminals. This provides a path to present its next-generation android terminal and acquiring solution to its NZ customer base.
On the company's outlook, Smartpay said:
With a strong finish to the 2023 financial year we are now looking forward to the 2024 financial year.
Our recent NPS (Net Promotor Score) surveys have again rewarded our focus on customer experience with Australia at 70 and NZ 49.
We remain committed to the ongoing execution into the Australian opportunity, development of the New Zealand opportunity and leveraging the strategic value of both our New Zealand and Australian businesses.
With preparations underway for the realisation of a truly trans-Tasman payments business, where we will deliver our market leading payments solution and customer experience to our entire network of customers, we look forward with anticipation to the year ahead and beyond.
The Smartpay share price jumped when it reported these numbers on 26 April 2023, as seen on the chart below.
What does WAM think of the ASX share?
The fund manager suggested the ongoing growth of Smartpay "demonstrated its continued success at capturing market share from its key competitors".
WAM also said that a "shift from their traditional rental model to a transaction acquiring model in New Zealand should be more profitable for the business, however, the company is still in the early stages of exploring this new opportunity".
The investment team is looking forward to hearing more as the initiative progresses.
In Smartpay's FY23 half-year result, it saw revenue rise by 68% while earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 119% to $8.1 million. Net profit before tax improved 637% to $2.7 million. The company also saw positive operating cash flow of $10.1 million generated in the half-year period.
