UPDATE 1-Afterpay shares hit record on higher core profit view, new investor

(Adds market cap, details on stake, background)

Aug 20 (Reuters) – Australia’s Afterpay Ltd surged almost 10% to a record high on Thursday after the buy-now-pay-later firm raised its annual core earnings forecast and said Japan’s Mitsubishi UFJ Financial Group Inc had taken a roughly 5% stake in it.

Alternative credit firms such as Afterpay, which offer small loans to shoppers and make money by charging merchants a commission, are riding high through the coronavirus pandemic amid a rapid shift to online shopping.

State aid to help people tide over a pandemic-driven downturn has also helped, with retail sales in key markets such as the United States bumped up by shoppers cashing in their stimulus checks.

Afterpay shares, which have scaled multiple life highs in recent months as online transactions swelled, jumped as much as 9.5% to a record A$82, giving the firm a market capitalization of more than A$21 billion ($15.10 billion).

The company forecast full-year underlying core earnings of A$44 million ($31.6 million) after markets closed on Wednesday, up from its prior guidance of A$20 million to A$25 million, due to lower-than-expected losses on customer transactions.

Its stock was also boosted by news that Japan’s largest lender by assets had acquired nearly 14 million shares, months after Afterpay revealed Chinese gaming and social media giant Tencent Holdings Ltd as a shareholder.

Tencent’s interest was seen as a sign of confidence in the buy-now-pay-later sector’s long-term potential as its popularity grows, mainly with millennials.

Afterpay is set to report full-year results on Aug. 27.

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