The Smartpay Holdings Ltd (ASX: SMP) share price has continued its bull run today, with shares up 7% on a trading update.
Smartpay is the largest independent EFTPOS provider in Australia and New Zealand with more than 25,000 merchants and 35,000 EFTPOS terminals.
The company started in New Zealand where it now has a well-established and relatively stable market, while Australia is the company’s high-growth opportunity. Smartpay is dual-listed on the ASX and NSX.
Australian growth
Smartpay’s trading update outlined results for the three months to 31 December 2020, the third quarter of FY21. The update showed that Australian acquiring revenue for the quarter was up 75% year-on-year, and 35% higher than the previous quarter.
Margins also continued to trend higher, although no specific figure was provided. Smartpay reported positive customer acquisition during the quarter, with the number of Australian transacting terminals growing from 4,611 at the end of Q2 to 5,775 at the end of Q3. This figure includes both new terminals and COVID-impacted terminals returning to transacting status.
New Zealand stable
Smartpay’s New Zealand business remained stable with revenue increasing 2% from Q2 to Q3. The high growth of the Australian business has turned it into Smartpay’s dominant market, with Australian revenue now accounting for around 54% of total revenue in Q3 FY21, compared to 38% in the same period the previous year.
The next big ASX fintech?
Smartpay is reporting encouraging growth rates and the share price has responded, increasing more than 30% since the start of the year.
While the Australian growth rate is positive, it seems the company has squeezed all it can out of New Zealand, which could raise questions about how scalable the business will be here.
Another important consideration is that the Q3 update includes the Christmas period, which is traditionally a strong quarter for Smartpay.
Even so, its strong growth over the Christmas period in 2020 shows the business is starting to take hold in Australia. This is one company I’ll be watching closely over the next few months.
Picking winners in the technology space can be a difficult task, but if you’re looking for growth then a good option might be an Australian technology ETF, like the BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC).
