HUM 1.96% 50.0¢ humm group limited

The reason why FXL is NOT a BNPL company

  1. 94 Posts.
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    After holding fxl since June, I sold all my 200K+ shares with a 20% loss today, for the reasons I want to share with you guys below:

    1. The market sees fxl as a traditional diversified finance institute, rather than a BNPL provider with high growth anticipation. Just have a look into the charts of the big four banks one can easily find the similarity in the price trend between them and fxl, all hammered down from pre-covid high and struggling climb half way back.

    2.The 3 segments of the company, SME, Credit cards and bnpl. SME is in big trouble in this recession, small business are struggling to survive or hibernate with government stimulus not aim to borrow money to grow, credit card is being replaced by new fintech such as bnpl, it is already obsolete and its future is doomed. BNPL is a highly competitive space inflated with free money created from air by central banks, everyone knows it's a huge bubble and the pursuit of high growth is the only way to satisfy the capital, many Companies will not be there in a few years.

    3. fxl. IS NOT profitable as a bnpl provider but a Diversified Finance, an inferior version of banks. It made money as a lender in the past from its credit card and SME segments which are both under heavy pressure now. It missed the highly risky growth opportunity of BNPL as it is a huge bubble mentioned above. The bnpl is a winner takes all game, apt and zip like first movers have the advantage of user recognition and volume, with volume they are advantaged to sign more partners as the businesses need more custome to make money. Look back into 2010s in China there were hundreds of groupon model sites backed with hot money and now only one biggest left-Meituan, the bnpl is nothing new but a repeat of Groupon's history.

    4.Will fxl success as a bnpl? Hardly. fxl knows why it's not loved by the market, all the recent movements such as simplification and rebranding are all in purpose to labbled it as a bnpl to get market interests, unfortunately it's too late and too slow, and superficial. Fundamentally fxl is still a old thinking bank like company with too much historical burdens, losing its profitability and forced to enter the gladiatorput, just like a middle aged man with family who can not afford to lose instead of a young 20s eager for life's challenges and failures as lessons learnt. The 3 year transition should be done in 3 month however it wont make much difference except for RJ.'s salary.
    BNPL, just like the Groupon model, is all about Market coverage from both business and customer ends. You have large number of users which is the volume, then you can sign good businesses and they attract more customers for you, when you are dominant of volume, you may be able to sign exclusive deals with top businesses. It is either a virtuous or vicious circle, and humm is unfortunately in the latter. Have a look at their partner list, most brands are with at least 2 other competitors, Ikea doesn't even show humm online at all.

    The effectiveness of the differentiation strategy which focuses on large purchases is
    also questionable, no detailed financial figures released so far to allow us to evaluate it, however, with the main dominant bnpls' client base getting older, it will easily take over considerable market shares. The likes of apt and zip are not doing the high end market is not because they can't but they get more return of growth per capita investing in the younger users with more frequent transactions and they will be older and wealthier in the near future.

    AND remember, the hotness of hefty valuation of the bnpl sector won't last forever, and the business model is yet to prove it has the capability to turn profitability, the low moats and the regulatory, the changing central bank polices are all huge risks to any bnpl, but for now, it's simply a race of money burning and land grabbing backed by cheap money without considering the sustainable future of the company..in such a picture, even if fxl successfully transits what could be awaits?

    As an entrepreneur myself participated in the Groupon battle, I don't think there's much RJ can do, the expensive and risky OS expansion is not an option considering the whole company is losing its pivots of profitability, (what the CR for?) ANZ bnpl market is too small and over crowded, this is probably why fxl is so much shorted, the future of this dinosaur is bleak.
 
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