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Wednesday, July 4, 2018

Revenue Group Bhd - Emerging E-Payment Partner

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Revenue Group Bhd (RGB) is principally engaged in the local distribution, deployment and maintenance of Electronic Data capture (EDC) terminals as well as provision of electronic transaction processing services for payments. These are performed either through EDC terminals, e-commerce/mobile commerce or QR payments as acquirers, master merchants, third party acquirers or third party payment processor via its single flagship platform, revPAY. The group also provides solutions and services in relation to payment gateway and payment network security. Partnering with an extensive range of local and international branded card payment schemes and an e-money payment scheme, RGB's products and services are principally provided to financial institutions, physical store merchants and online store merchants following successful direct consultative engagement.
We derive a fair value of RM0.54 based on a 15x PE multiple to its FY19F EPS of 3.6 sen. The IPO is expected to raise approximately RM20.6m from the issuance of 55.7m new shares. Besides apportioning 7.3% of IPO proceeds for regional business expansion into Cambodia and Myanmar, 39.3% of IPO proceeds are allocated for the expansion of its business presence in Malaysia while 19.6% of the proceeds are allocated for enhancement of revPAY and expansion of its information technology team, that are earmarked for long term future growth.
  • Growth drivers. RGB’s growth will be focused on i) regional business expansion, ii) expansion of IT team and development of new products, iii) enhancement of revPAY platform, and iv) expansion of business presence in Malaysia.
  • Competitive strengths. RGB’s competitive strengths include: i) offering multi-channel payment solutions, ii) partnering with an extensive range of local and international branded payment schemes, iii) the only partner in Malaysia to China-based Company A to process outbound payments iv) technology know-how and sustained R&D efforts, v) experienced key senior management team, and vi) established working relationship with customers and partners.
  • Catalysts. Key drivers may include: i) improvements in payment security, ii) availability of more innovative payment channels, iii) changing consumer payment behaviours, iv) increasing mobile phone and broadband penetration, v) expected growth in the e-commerce industry, and vi) supporting government initiatives and technological advancements.
  • Key risks. Key downside risks, among others, include i) dependency on major customers, ii) dependency on continued memberships with payment schemes, iii) competition and advancements in the cashless payments industry, and iv) fluctuations in foreign exchange rates.
Source: PublicInvest Research - 4 Jul 2018

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