$1 Club, page-19494

Hi All,

As a holder of IOU shares, I thought I’d post on why I think the company is well positioned to capitalize on the significant growth potential of Malaysia and other areas of SEA. This is written with consideration of Pine Labs, who I know well, and who I believe can also own a piece of what is a highly fragmented market. The number of consumer transactions alone in this region offers the potential for there to be multiple winners, with the most well capitalized one’s and the one’s with the deepest connections in each region – likely to win out. Where IOU sits, represents a significant opportunity to buy in at a very attractive valuation and I still can’t believe investors have been spooked by the Pine Labs announcement to the extent they have just sold out. Hopefully this post alleviates a lot of that concern.

So let’s talk about what has spooked investors and that’s the announcement of Pine Labs entering Malaysia.

Pine Labs ($2bn valuation) v IOU ($200m valuation)

Let’s stalk about Pine Labs (currently $2bn valuation) and what they will target in Malaysia according to their press release (https://www.businesswire.com/news/home/20210329005846/en/Pine-Labs-Launches-Buy-Now-Pay-Later-in-Malaysia) :

- “CIMB Bank, AmBank, HSBC Bank, AFFIN BANK,and RHB Bank are the top banks in Malaysia that are already on Pine Labs’ BNPLplatform” . So let’s look at for argument sake who the top banks listed in Malaysia are and who out of Pine Labs or IOU has relationships with these guys. According to Wiki (https://en.wikipedia.org/wiki/List_of_banks_in_Malaysia) it lists the following in order of largest:

1. Maybank

2. CIMB Bank *Pine Labs*

3. Public Bank Berhad *IOU*

4. RHB Bank *Pine Labs* and *IOU*

5. Hong Leong Bank

6. AmBank Group *Pine Labs*

7. UnitedOverseas Bank Malaysia

8. Bank Rakyat *IOU*

9. OCBC Bank Malaysia Berhad

10. HSBC Bank Malaysia *Pine Labs*

11. Bank Islam Malaysia *IOU*

12. Affin Bank *Pine Labs*

13. Alliance Bank Malaysia Berhard

14. Standard Chartered Bank Malaysia *IOU*

15. MBSB Bank Berhard *IOU*

16. Citibank Malaysia *IOU*

- So as you can see, Pine Labs has relationships with 5 out of the top 16 banks in Malaysia, and IOU has relationships with 7 out of the top 16 banks in Malaysia.

- Now as I said before, there is enough of the market opportunity for both Pine Labs and IOU to enjoy, but please ignore the scaremongering from those who believe Pine Labs will take 95% of the market based on what they did in India. This will not occur in Malaysia. IOU already has relationships with 7 out of the top 16 banks in Malaysia, Pine Labs has 5.

- IOU has a very strong brand in Malaysia already evidenced by the fact that they are currently processing 20 MILLION transactions per month in Malaysia. The key to strong deployment of their BNPL offering and any offering for that matter, is having deep connections which they already have.

- Also remember Pine Labs is a $2bn valuation, IOU is $200m only. And SEA is ripe to grab for both companies and also big enough for both to be good competitors there.

Strong SEA penetration either directly or via merchantagreements

IOU’s last financial report also revealed that along with Malaysia, they have operations in Singapore, Indonesia and Myanmar; and through EasyStore and Ipay88 partnerships, they have access also to the Phillipines, Thailand, Hong Kong, Vietnam, Cambodia and Bangladesh.

Ipay88 currently services more than 45,000 onlinemerchants and 20,000 in-store merchants in Malaysia alone – just think about the scale potential of that alone, EasyStore had 5000 merchants in Malaysiaalone. So IOU has access to 70,000 merchants in Malaysia.

Now its’ not a like-for-like comparison obviously, but it really is all about the merchant and customer grip you have on a market when thinking about BNPL players. We know that when it comes to the Aussie and US peers we know well, but put that in perspective when you look at the below:

Afterpay: 74,700 merchants (mkt cap: $29bn)

Zip Co: 38,500 merchants (mkt cap: $4.07bn)

Sezzle: 26,700 merchants (mkt cap: $1.45bn)

IOU: 70,000 merchants access (mkt cap: $200m)

So again, IOU could not be better positioned from a merchant take up angle (through their existing partnerships with EasyStore and iPay and likely others) and also customer take up angle once hard launch has occurred.

IOU valuation looks extremely cheap – one could argue thatit could be valued at $1.00-$1.50 and potentially higher on what takeup couldlook like

Now sitting with $50m in the bank, a $200m valuation and $6m in annual revenue (doubling the first half as an assumption and not counting any BNPL with that number), you could argue that IOU should be valued far higher – even potentially at multiples on where it’s trading at. I know there has been some that have done sum of the parts valuations on IOU to come up with an estimate, and I won’t bother to go down there given market penetration is not an easy number to forecast – but I will sit comfortably knowing that they are on the right path to achieving their goals that they have communicated well to date in their last presentation released to the market and last quarterly. Relationships with 7 out of the top 16 banks, not to mention a host of corporates for which they already have existing relationships with, and the 70,000 merchant access they have in Malaysia, should make the transition in selling BNPL services via these companies to customers all that more easier.

So to all holders, take a deep breath, hang in there and have confidence that IOU has a very detailed plan of attack in a market that they know very very well.