iSignthis’ Share Price Giving YTD Return of Over 800%; A Glance at 2019 Developments

Stock Information

The shares of IT sector player iSignthis Ltd (ASX:ISX) have moved up a staggering 9 times or over 800% on a year-to-date basis, while the YTD returns for S&P/ASX 200 Information Technology (Sector) and S&P/ASX 200 stands at 32% and 17%, respectively. Since 6 February 2019, the company’s share price has been trending in the upward direction. On 6 September 2019 (AEST 12:21 PM), the share price of ISX was trading at AUD 1.415, up 2.536% or AUD 0.035 from its previous closing price. The company has a market cap of AUD 1.51 billion and approximately 1.09 billion outstanding shares.

As compared to much bigger players in the same field, ISX is providing a better return. ISX is a principal member card acquirer that is engaged in providing a safe, seamless and quick experience for customers as well as merchants. The company provides products that help in optimising the online payment user experience. Its services cater an overall end customer onboarding solution, remote identity verification, payment processing, card acquiring, settlement, SEPA transfers, IBAN accounts as well as deposit-taking E-Money services. The company also provides regulatory compliance to enhance the customer due diligence level for its business clients via its KYCC platform, Paydentity™. KYCC stands for know your customer’s customer. This platform is used for verification of ownership of cards as well as accounts. It also gives a basis for EDD KYC compliance, delivers high conversion rates, as well as verifies ownership of all card types from all major card schemes such as American Express, VISA, and China Union Pay.

Its payment platform, ISXPay® helps merchants to accept and process payments online from customers across the world. By combining the unified Payment Platform of ISX, ISXPay®, the merchants are able to accept all kinds of major cards along with several alternative and domestic payment methods.

These products offer an advantage to iSignthis over its peer group players like Afterpay Touch Group Limited (ASX: APT), which was recently under limelight when the Australian Transaction Reports and Analysis Centre (AUSTRAC) ordered an audit of its anti-money laundering/ counter-terrorism financing (AML/CTF) compliance.

Let’s take a look at the company’s major achievements in 2019, so far.

1H 2019 Highlights

Total audited operating revenue of the company in the first half of 2019 ended 30 June 2019 stood at AUD 7.5 million, up by more than 49% from AUD 5 million recorded during the previous corresponding period (pcp). The company’s total income along with other income for the period was AUD 8.2 million, representing an increase of 48% from AUD 5.5 million in the same period a year ago. The statutory loss for the period declined by 75% to AUD 0.7 million on pcp.

The balance sheet of ISX witnessed an increase in net assets from AUD 11.44 million in 2H 2018 to AUD 12.87 million in 1H of 2019. Also, the company’s debt to equity ratio is 3.027, which means that the company used more debt to fund its business in the reporting period.

ISX was able to attain its positive cash flow position by the mid of May 2019. The company used AUD 282,743 in its operating activities and AUD 85,933 in its investing activities. The net cash generated through financing activities was AUD 1.75 million. The position of cash and cash equivalents of ISX by the end of 1H 2019 stood at AUD 9.9 million.

Major ISX Developments since January 2019

On 2 January 2019, around 1,208,936 fully paid ordinary shares were issued by the consolidated entity upon the vesting of performance rights. On 15 February 2019, ISX completed the acquisition of UAB Baltic Banking Services. The initial purchase price for the acquisition was EUR 75,000 along with fully paid ordinary shares in the consolidated entity worth EUR 75,000. Moreover, an earn out was also linked to this acquisition, on the basis of a multiplier of EBIT as at 31 December 2019 minus the initial payment, capped at EUR 1.5 million. The consideration was paid as 85% in the form of fully paid ordinary shares with a majority escrow provision, while the remaining 15% was the cash component.

Operational Trading Update

Position of the actual annualised monthly gross processing transaction value (GPTV) as on 31 July 2019 stood at AUD 830 million. It represented a 96% increase in the value post the completion of 1H 2019. From the EU Tier 1 Network, the Merchant Services Fee (MSF) increased as per the expectations with new merchant onboarding along with growing processing volumes. By the end of July 2019, Group approvals increased by 14% to 240. This value comprises of 95 acquiring approvals and 145 e-Money Account (EMA) approvals. Apart from this, the sales team was able to build up a significant pipeline of merchant applications. These applications are being processed by the approval team or the underwriting team. The pipeline created by these salespeople would help in growing the eMoney and card services.

The company on 31 July 2019 announced the appointment of 20 years experienced banking and financial services professional, Elizabeth Warrell as its Group Chief Financial Officer (CFO). She has exposure in Australia as well as abroad, and in ISX, she would be taking care of the group’s financial, treasury, accounting as well as compliance functions.

Recently, iSignthis Ltd announced that it signed an Australian Principal Member licensing agreement with the APAC (Singapore) based regional subsidiary company of Visa Inc. As per this agreement, ISX would be acting as the merchant’s card acquiring organisation and process those cards that are not present via online/remote payments mode. It would also make clearances on behalf of the merchant for cards that are issued from any place across the globe by associate member institutions or other Visa Principal. The source of the company’s revenue would be from its contracted merchants who would be charged in the form of a percentage fee known as Merchant Discount Rate on the sale amount.

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