The solid tree, page-12

Speaking of solid branches, here's another one to think about.

What we now know from the May 2016 Operations Update below is that TSI India's average transaction fee at present is approximately $0.10c per transaction based on current business alone which has really only been based on two of the five business lines to date (Brown label ATM management and deployment and Bill Payment Solutions) as the other three business lines have only come on approximately early to mid 2016 and are yet to gain momentum.

http://www.asx.com.au/asxpdf/20160502/pdf/436ykfjrnbyg1y.pdf

TSI India's actual business lines on the market throughout India are:

* 1 = ATM managed service suite.
* 2 = White Label & Bank ATM Deployment.
* 3 = Bill Payment Solutions (physical kiosks).
* 4 = ATM E-Surveillance Solutions.
* 5 = ATM Energy Management.

As per recent Investor Presentation below, TSI India are in active discussions across these NEW potential business lines with existing and potential new clients:

* 1 = Reconciliation as a service (RAAS) ATMs.
* 2 = Reconciliation as a service (RAAS) Cash Recycler Transaction.
* 3 = Reconciliation as a service (RAAS) Cards Visa/Master Card.
* 4 = Reconciliation as a service (RAAS) UPI.
* 5 = Bharat Bill Payment Solution (BBPS).

http://www.asx.com.au/asxpdf/20160808/pdf/4394wpqqhsjt1y.pdf

Should TSI India be successful across these business lines they will have a total of 10 actual products on the market that they can either market individually or collectively as a package for increased pricing power. Should these solutions be packaged as a solutions suite, that current approximate transaction fee of 10c could certainly increase. But would packaging these solutions be the most strategic path forward for the company? Here's one of the reasons I ask this question....

Let's look at one of the untapped business lines TSI India currently has on the market in India - ATM e-surveillance system.

The 2014 article below highlighted that:

Costs for hiring one security guard was RS 36,000 per ATM per month or AUD $752.42.
Remote e-surveillance costs were RS 5,000 per ATM per month or AUD $104.50.

That's a saving of RS 31,000 per ATM per month or AUD $647.92 by having this e-surveillance system installed at each of their sites.

http://economictimes.indiatimes.com...kh-atm-security-jobs/articleshow/49425493.cms

In other words, if banks are hiring one security guard per site per month it would cost them $9,029.04 per year / per ATM as opposed to $1,254.00 per year / per ATM by having a remote ATM e-surveillance system in place.

Now let's stretch this out to see how this might hypothetically look if TSI India's had an e-surveillance system integrated across the existing 14,000 ATMs that they're managing. Note, at present they have only secured one 500 ATM e-surveillance contract (outside of their own ATMs).

I realise that TSI India have approximately 2300 ATMs of their own (pre Mphasis deal) so for the sake of this exercise let's keep this hypothetical exercise all together ie at 14,000 ATMs total.

Cost to hire guards across 14,000 ATMs per year:

14,000 ATMs x $9,029.04 per year = $126,406,560.

Cost to have a remote e-surveillance system across 14,000 ATMs per year:

14,000 ATMs x $1,254.00 per year = $17,556,000.

Savings across entire fleet per year:

$126,406,560 - $17,556,000 = $109,850,560!!!

The question everyone might be asking is... ok that's all good, but what would the EBITDA margins be on this ATM e-surveillance business line for TSI India?

Jonathon Howe's note below is instructive...

http://hotcopper.com.au/threads/chart.2788575/page-101?post_id=19402940#.V-iRrfB97IU

Now here's what I keep coming back to...

The March 2014 article below highlighted that only a mere ONE PERCENT of the total 160k + ATMs in India (at the time) had or proposed to have e-surveillance systems. Perhaps it is closer to 10% today as ATM numbers are growing at a decent compounded rate year upon year, now just over 200k ATMs throughout India.

http://articles.economictimes.india...crimes-control-room-automated-teller-machines

https://www.rbi.org.in/scripts/ATMView.aspx

So assuming it's at 10% of 200k today, that means that there would only be approximately 20k e-surveillance systems installed and operational at these ATMs throughout the country, leaving approximately 180k ATMs up for grabs for an e-surveillance solution. Note, projected ATM growth across India to reach 400k by 2020. As I mentioned in some of my previous posts, I've only come across a handful of 'ATM specific e-surveillance' players in India, so fingers crossed TSI India is well positioned to capture a large chunk of this enormous market opportunity. So what sets TSI India apart from the other handful of players in this space? The May 2016 Operations Update highlighted that TSI India have developed their own in-house IP for e-surveillance with enhanced features to asset owners, not available in the Indian market today.

Not available in the Indian market today!!

So what could this potentially mean?

In the May 2015 Corporate Presentation below, the company highlighted that they have the potential to target 100+ banks with new leading technology. TSI India's very own in-house IP for e-surveillance would certainly fit in the 'leading technology' category.

http://www.asx.com.au/asxpdf/20150515/pdf/42yl8x4cqbsnp7.pdf

What slice of the current 200k ATM e-surveillance market can TSI India capture is the question. Even a modest 20% of that market would equate to 40k machines with an e-surveillance solution. As you can see banks could realise significant cost savings if such a solution was implemented, which in turn would mean ANOTHER very lucrative business opportunity for TSI India, when you take into account the hypothetical exercise I highlighted above.

The other thought that I have been ruminating over for the past few years is whether TSI India could also have the potential to license their in-house cutting edge ATM e-surveillance technology system around the world. What value does one put on the sheer potential magnitude of a cutting edge solution like this? Or that the e-surveillance solution isn't just about targeting the ATM space but any asset that requires an e-surveillance solution as highlighted in previous announcements by the company.

This is yet another example of one business line that has untapped enourmous business potential and the beauty is that this product of TSI India is already on the market throughout India.

Tony