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Buy-now pay-later (BNPL) giant Afterpay (ASX: APT) has underestimated its earnings potential by half for the financial year according to a trading update issued yesterday.
The company says its EBITDA for FY20 will be $44 million, which is almost double what it announced as part of a July 2020 trading update.
However, Afterpay still expects to post a loss for the year of approximately $34 million.
Further, unaudited the FY20 net transaction loss (NTL) as a percentage of underlying sales is now expected to be approximately 0.38 per cent, up 17 basis points on its July predictions.
"This improvement in NTL is primarily due to higher than anticipated collections of instalment payments relating to the 30 June 2020 receivables balance that have occurred post 30 June 2020," says Afterpay.
"This has in turn translated into a materially lower provision and lower losses than expected in FY20."
Because of the positive change in NTL, Afterpay's net transaction margin (NTM) as a percentage of underlying sales and earnings is expected to be higher than the July trading update, with NTM at approximately 2.25 per cent.
Further details on Afterpay's FY20 will be provided when the company releases its full year results on 27 August 2020.
In July the company announced an $800 million capital raise to ride its significant FY20 sales growth.
The capital raise was comprised of a $650 million institutional placement, with a further $150 million raised via a share purchase plan (SPP).
In addition, both founders of the BNPL company sold down 2.05 million shares each, representing 10 per cent of their respective holdings.
After the sell-down Molnar and Eisen remain Afterpay's largest shareholders, with a relevant interest of approximately 18.4 million shares respectively, worth $1.14 billion each.
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