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Plenty of market excitement has been spent around the likes of Afterpay Touch, and Zip Money over the past 24 months. The digital installment purchase and payment services are enjoying some serious momentum after seeing some explosive growth in users, both in retail partners, and end-use customers.

While both of these stocks could enjoy a bright future, particularly if overseas expansion works as planned, they are both now trading at extremely high valuations. Valuations that aren’t just pricing in a continuation of current growth levels, but that are also pricing in a likelihood that those customers can be made quite profitable.

At present these companies both operate at a loss, and there is always chance they never turn a profit. These companies are digital payment platforms, essentially offering installment purchase services at a very large range of retailers.

Similar companies already exist and have been offering similar services (usually at a narrower range of businesses) for a period of time. Consider the buy-now, pay-later service offered by Harvey Norman, or similar services offered by JB Hi-Fi.

One of these point-of-purchase financiers is Latitude financial, who are currently attempting to list on the ASX. Latitude is a long-established business, previously owned by GE money, that is generating consistent profits and is listing at a reasonable multiple of those profits.

They have provided installment purchase services as well as car and personal loans to the Australian market for a long period of time, although under different branding until 2015. Latitude was bought from GE money by private equity group KKR, investment advisor Varde Partners, and Deutsche Bank in 2015.

Latitude financial is planning to list at around 13 times the expected earnings of FY20, based on the expectation of cash NPAT (Net Profit After Tax) growing at 12 percent in FY19 and 7.6 percent in FY20. Should the IPO happen successfully, this will leave the company with around a $3.5 to $4 billion AUD market capitalisation.

Latitude had planned to list last year, for around $1bn more in market capitalisation, but the deal failed to gain traction. This time around, they’re hoping a lower valuation will see them across the line.