Beforepay: Fair Value Today, Credit-Rating Titan Tomorrow?
KashKow Equity Reserach ASX: B4P
October 11th 2025
B4P, founded in 2019, is an ethical financing company for Australians. It operates two distinct businesses: Beforepay, its consumer lending platform, and Carrington Labs, the credit risk model that powers its lending decisions.
BeforePay
B4P provides flexible, interest free cash advances between $50 and $2000. The advance limit is set by C-Labs. A fixed 5% transaction fee applies to all loans, which must be repaid in four installments or less and within 62 days.
B4P’s platform is straightforward and intuitive. They advertise that new users can access financing in under 5 minutes. All users must share bank transaction data to access the platform. The transactions are fed into C-Labs to assess creditworthiness. The platform also integrates budgeting tools to promote continued use. B4P reported 269,000 active users in FY25. The typical user is 35 years old, earns $66,000 p.a, and takes an average advance of $370. The average loan is repaid in 26 days.
Carrington Labs
C-labs is a credit risk model that incorporates AI to analyze user data, identify key features, and predict the probability of default across different loans. C-Labs distinguishes itself by calculating the elasticity of default, which quantifies a user's sensitivity of default risk to changes in borrowing limit.
B4P commercializes C-Labs through partnerships with other lenders, allowing them to train custom versions of the model using their data, effectively outsourcing their credit-scoring process. Currently, B4P has three partners: Kiva, CCBank, and Doc2Doc. While no revenue was reported from these deals, they are expecting recurring revenue by charging based on usage.
How big is their moat?
B4P is distinct from major BNPL players as it offers cash advances rather than point of sale credit restricted to specific merchants. The trade-off is B4P’s transaction fee, which regular BNPL services typically lack. Functionally, B4P is more akin to traditional payday loan operators. When analyzed through this lens, B4P is regarded as safer and more attractive because of its lower and transparent fee structure. B4P has a page on how they are safer than tradition payday loans.
Customer sentiment is largely positive, reflected by 4.4 and 4.9 star rating on the major app stores. Most negative feedback centers on unexplained reductions in borrowing capacity for otherwise compliant existing users. The frequency of these complaints suggests B4P employs a preemptive risk management approach, quickly cutting off users if their underlying data suggests an elevated risk of default.
B4P is an outlier among its competitors. While major BNPL lenders keep credit models internal, B4P has chosen to commercialize C-Labs by partnering with other lenders. In essence, they are attempting to enter the market niche of credit rating agencies like FICO or Equifax by selling a predictive borrower score. B4P currently has a low level of adoption compared to the industry titans.
Are they healthy?
B4P is relatively healthy, generating positive cash flow and reducing debt, suggesting a low risk of bankruptcy. Key Financial Highlights (FY25):
Revenue: $40M (up 14% YoY).
Net Profit After Tax : $6.7M (up 74% YoY).
Cash Flow from Operations: $4.86M (from -$4.02M in FY24 and -$18M in FY23).
Debt: $31.9M (down from $38M in FY24).
Unused credit facilities: $24M (up from $17.7M YoY)
Quick and Current Ratio: 14.4.
Cash and Cash Equivalents: $14M (down $19M YoY).
No dividends or share buybacks (typical for a growing microcap stock)
Additional comments
Revenue: With total advances of $804 million, B4P's $40 million revenue is consistent with its 5% fee structure. The 1.1% default rate does not significantly alter this.
Churn rate: The average 26-day repayment cycle results in a yearly churn rate of 14.04.
Debt: $31M is split between Longreach and Balmain group. The average weighted debt interest rate is 12.92%. Note the weighted debt rate increased compared to FY24 (12.92% vs 12.02%) as B4P paid off cheaper, older debt and took on more expensive debt.
Margins: B4P’s net fee margin is estimated as 63.13% = $36.156M / $57.271M before SG&A. This allows a large buffer to cover any defaults.
Have they got legs?
B4P shows strong and sustainable momentum through increased profitability and reducing risk while expanding their user base.
Delivered 4 consecutive halves of increased revenue and earnings.
Efficiency: ROE is 19.3% and ROA is 9.2%.
Diluted EPS nearly doubled to $0.13.
Operating margins 27.12%, up from 23.57% YoY.
Active users grew 12% to 269,000, driving $807.4M in advances with a stable average advance size.
Net defaults 1.1% (down from 1.4%)
However, insider transactions within the past 6 months suggest otherwise.
No insider buys
1 insider sold out. 5 insiders trimmed positions.
Is this a bargain?
The DCF uses FCFF, chosen because B4P does not pay dividends and has negative FCFE.
The resulting target price is a best guess and should be treated with skepticism given the company's limited operating history.
FCFE
WACC
Required Rate of Return was calculated using CAPM.
Risk free rate was the Australian 10Y yield
Market risk premium was sourced from Professor Damadaran’s website.
Beta was sourced from Yahoo Finance.
Oddly enough, the required equity return was below the debt interest rate. This seems counter intrusive as equity is generally riskier.
DCF assumptions
10Y forecast, 15% near term growth rate in FCFF.
Terminal growth rate of 2.5% (In line with long term average inflation rate)
Discount rate of 12.22%
Target price $2.28. This price reflects the consumer lending business only as C-Labs has not recorded any revenue.
Thesis
While our current $2.28 target price suggests B4P is fairly valued, this figure only accounts for the consumer lending business. We are strongly bullish based on the conviction that C-Labs will become a separate, future cash flow generator. Although this would be difficult to value considering B4P has not disclosed C-labs revenue. That said, C-Labs efficacy is proven by the fact that it powers B4P’s entire consumer lending business and its consumer lending operation is profitable on its own.
Headwinds
While B4P is well positioned, there are several external and operational risks that could hinder future growth:
Regulation: The BNPL industry faces the persistent threat of new regulations that could curb growth. Of particular concern is any regulation targeting transaction scraping, which B4P heavily relies on.
Market competition and saturation: Given the extreme saturation of the BNPL market, heightened competition presents a significant challenge to B4P's pricing. If B4P's 5% transaction fee becomes comparatively unattractive, it could severely inhibit organic user growth and negatively impact revenue expansion.
Financing and Debt: B4P faces the future risk of being compelled to secure debt financing at unfavorable terms. An increase in the cost of borrowing would directly impact margins, leading to a slowdown in overall growth and a reduction in operational efficiency.
DISCLAIMER: NOT FINANCIAL ADVICE
This report reflects the personal, non-professional opinion of the author. I am not a licensed financial professional and this content is for informational purposes only. Do not treat this as personalized financial advice; always conduct your own research and consult a financial adviser before investing.
CONFLICT OF INTEREST
I hold shares of Beforepay Group and will financially benefit from stock price appreciation. This is a direct conflict of interest and may bias the analysis. The author may buy or sell BPL shares at any time without notice.
INVESTMENT RISK
Investing involves risk. You may lose all of your capital. Past performance is not indicative of future results.
Sources:
https://play.google.com/store/apps/details?id=au.com.cheq&hl=en_AU&pli=1
https://apps.apple.com/au/app/beforepay-borrow-up-to-3000/id1478582360
https://www.financialcounsellingaustralia.org.au/buy-now-pay-later-for-essentials/
https://ecommercenews.com.au/story/gen-z-australians-turning-away-from-credit-cards-for-bnpl
https://www.tradingview.com/symbols/ASX-B4P/financials-statistics-and-ratios/?statistics-period=FY
https://www.finder.com.au/buy-now-pay-later/buy-now-pay-later-statistics
Comments
Post a Comment