Splitit Payments Ltd (ASX: SPT) is the company that some think may be the next Afterpay Touch Group Ltd (ASX: APT). But what does the quarterly report show?

About Splitit

Splitit offers consumers the ability to split the purchase price of basic products; the popular ‘buy-now-pay-later’ model. As Splitit’s website reads, “Shoppers can split their purchases into up to 36 interest-free monthly payments using their existing Visa or Mastercard.”

For a comparison of Splitit’s business model and Afterpay’s business model, see this Rask Media article.

Splitit released their quarterly update to the ASX this morning. Here’s what you may have missed…

The 5 Key Points

  • 57 new active merchants – 103% increase year-on-year to a total of 437 merchants
  • Multiple high-turnover merchants expected to go live in the second quarter of calendar year 2019
  • Total number of unique shoppers up 36% quarter-on-quarter to 160,000
  • Underlying Merchant Transactions up 168% year-on-year to $32.8 million
  • $556,000 in Merchant Fees, up 31% quarter-on-quarter

Other Points to Note

Splitit’s report highlighted that the result is particularly impressive given that the March quarter is typically the slowest quarter for retail sales. Splitit also announced that work has commenced on the development of new plugins to be used with IBM WebSphere and other e-commerce platforms.

The cash flow update showed a net operating cash outflow of $3.58 million during the quarter, leaving the company with a cash balance of $9.18 million at 31st March 2019.

Outlook

Splitit said it is the only global interest and fee-free solution available for shoppers and they are, “well positioned to take advantage of this huge opportunity”.

The report highlighted an “extensive” sales pipeline but did not provide any meaningful changes to previous guidance.

My Take

While the growth rate of Splitit is impressive, it remains a very risky investment in my mind. With merchant fees totalling just $556,000 for the quarter, there has to be some seriously positive sentiment to value the business at its current market capitalisation of around $250 million. Since listing in January, the share price has already risen 143%.

An investment in Splitit may prove to be very lucrative, but I think the business may be overpriced and subject to too much hype. I’d rather invest in one of the companies mentioned in the free report below.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.