Shares in Beforepay Group Ltd (ASX: B4P) are down about 44% on a 12-month basis, despite the company reporting solid results at its recent quarterly update.
Shaw & Partners have run the ruler over the results and come up with a valuation significantly higher than where the shares are currently trading.
I'll get to that shortly. First let's have a look at the recent results.
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Record revenue as loans increase
Beforepay said on Monday it had generated quarterly cash net profit of $5.7 million on record quarterly revenue of $16.5 million, up 46% on the same period the previous year.
Total cash advances to customers in the quarter hit a record $265 million, up 17% year on year, driven primarily by an increase in the average advance size to $524.
Net bad debts increased by 0.54% to 1.41% caused in part by an increase in the size of cash advances.
Beforepay Chief Executive Officer Jamie Twiss said they were delighted with the strong start to the year.
He added:
These results demonstrate the strength of our business model and the benefits of our continued focus on credit quality and growth. With steadily increasing revenue, an enhanced Personal Loans credit model and expanded funding capacity, we are excited about the opportunities ahead.
Beforepay said it had maintained a strong balance sheet, with total cash of $13.6 million at the end of the quarter.
The company said it was also benefiting from a lower interest rate via a new loan facility which was executed in July.
Beforepay shares looking cheap
Shaw & Partners said Beforepay was trading on a price to earnings ratio of 3.3 times earnings per share for FY27.
They added:
This is a discount to the small-cap financial sector average of about six times. Historically, B4P has traded at a premium to the sector to reflect its growth and technological competitiveness. B4P has provided credit to over two million Australians, which gives B4P a data advantage in lending to subprime borrowers.
Shaw & Partners noted that the company had also grown its currently modest personal loan business, which originated $7 million in new loans during the quarter.
The broker said they expected personal loans to contribute about $3.5 million in revenue to the group in FY27.
Shaw & Partners has a price target on Beforepay shares of $2.90 compared with the current price of $1.35.
If achieved this would constitute an increase of 114.8%. Beforepay is valued at $70.6 million.
