Pretty penny: Why it pays to wait for the right moment to pounce

Pretty penny: Why it pays to wait for the right moment to pounce

Date of Report: Market close on Tuesday, 31st May
ASX: EPYPrice: A$0.535

52 Week Range: $0.395 - $0.570

Market Cap: $151.98M

Sector: Diversified Financials

Every second week we invite a leading fund manager to present at The Insider: Meet the Fund Manager. In February, Martin Pretty, from Equitable Investors, selected Earlypay as one of his three favourite stocks, noting the business had gone from strength to strength after acquiring another business in 2020.

11 February, 2022

30 March, 2022

The Insider: Meet the Fund Manager sessions are a great way to hear directly from leading fund managers. They share their approach to investing, favourite companies and their market view for the year ahead.

The Insider: Meet the CEO sessions feature a selection of company leaders who provide a succinct overview of big things their companies are doing. 

When a battle to take over Earlypay ended with the victor pulling out of a binding deal and leaving the company’s share price in disarray, Equitable Investors’ Martin Pretty jumped at the opportunity to take stake.

Mr Pretty, whose Dragonfly fund has delivered 4.43% per annum over the past three years, had been watching the company for several years after first meeting CEO Daniel Riley at a conference back when his business was still called CML Group.

At the time, the company was in the process of transitioning from being predominantly a labour hire and recruitment white-label business into the alternative financier focused on small and medium enterprises (SMEs).

It was a transformation that Mr Pretty was interested in, but one which eventually led the company’s management to decide a trade sale was the best option for shareholders, and CML Group was placed up for sale.

Then, in March 2020, the private equity company that won the takeover battle pulled out of its binding offer, which Mr Pretty said caused some “indigestion” in the share price, which dropped dramatically.

“Earlypay then had to go back and think about what the next growth strategy would be,” Mr Pretty said.

“What they did do, was they bought a fintech company called Skippr. Skippr had built a platform but had not commercially scaled it, so they effectively bought a new platform and brought in new efficiencies and it allowed them to access smaller customers they previously hadn’t been able to afford to market to.”

This strategy – which included the rebrand into Earlypay – helped the business return to growth, Mr Pretty said.
Importantly, Earlypay CEO Mr Riley said the features this platform offers provide the company with a unique edge in the SME financing space.

“We can provide loans as low as $20,000 and can increase that to loans of $20 million-plus,” he said.

“The reason for that is that the Earlypay platform automation allows us to profitably service smaller clients, while our scale, experience and our funding structures mean we can also serve very large national clients.”

Earlypay also lends money against their borrowers’ invoices, and integrates its platform with clients’ accounting software to offer real-time overview of receivables.
This process means the company can offer flexible lines of credit while shifting exposure from the borrower to the borrowers’ clients.

“That means we can service SMEs at all stages of the business cycle, whether they’re in start-up, growth or mature,” he said.

“We can also service businesses that are perhaps in wind-down phase or even credit impaired. We just heighten the level of our oversight depending on the credit rating of the client.”

Click here to view more videos from Martin Pretty’s  Meet the Fund Manager’ session, or click here to view the full ‘The Insider: Meet the CEOs’ session.

The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

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Martin Pretty

Founding Director & Investment Manager
Equitable Investors

Equitable Investors, an investment manager, operates the wholesale Dragonfly Fund – a top-5 domestic equities fund in FY21 with a 74.3% return. The company specialises in market segments with higher total returns, namely larger strategic opportunities, listed micro-to-mid cap companies, unlisted growth opportunities and mezzanine or alternative financing. Martin Pretty gained vast financial experience as an investment manager at Thorney Investment Group, helping deliver one of the group’s highest annualised three-year returns (18.2% per annum) as at February 2017. He is the director of several ASX-listed companies and as a financial journalist has contributed to the Australian Financial Review and other reputable publications.

The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.
Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.
The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.