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The latest BNPL stock going public is a hidden gem

by Investoradar

Buy now pay later has been gaining a lot of traction lately with Square (SQ) acquiring Australian BNPL company Afterpay for $29 billion, and Affirm (AFRM) reporting really strong results. Companies like PayPal (PYPL) and Mastercard (MA) are also introducing their own buy now pay later solution to catch up with the trend. Recently, PayPal also announced it is going to purchase Japan’s leading BNPL company Paidy for $2.7 billion. 

In the meantime, Kredivo (VPCB), a leading Buy Now Pay Later company in Indonesia is going public through a SPAC merger with Victory Park Capital. The company is the largest BNPL platform in Indonesia and is expanding rapidly to other South East Asia countries such as the Philippines, Vietnam, and Thailand. The BNPL market is huge in Indonesia with an estimated total addressable market of $25 billion due to its large population and increasing adoption of e-commerce. Its expansion into other countries will double its TAM to $50 billion. Unlike most countries in North America and Europe, the credit card penetration rate is very low in Indonesia with only 3% of people having access to it, whereas the Philippines, Vietnam, and Thailand’s credit card penetration rate is similar at 4%. Therefore, the BNPL solution is must more important in these countries and the demand for it is much higher as well. As the company stated, Kredivo is the credit card in Indonesia. 

The company currently already has a user base of 3 million, with an estimated revenue of $320m for 2022. This represents a CAGR of 128% from 2018–2022. It is also estimated the platform will double its user base to 6 million in 2022. Besides expanding into other countries, Kredivo also recently acquired a stake in a licensed bank in Indonesia in order to rebrand it and launch its own Neobank. This will allow the company to have more revenue streams by introducing new products such as auto loans, housing loans, deposits, and other investment products. There is a natural synergy for this expansion as Kredivo is able to leverage its large customer base and cross-sell different products. The SPAC deal values the company at $2.4 billion which represents an fwd 2022 EV/sales of 6.3 compared to the average BNPL company EV/sales of 10. This presents a favorable opportunity for investors as the valuation is attractive and the company is leading the BNPL market in Indonesia and South East Asia. 

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