Ann: Afterpay and Touchcorp intend to pursue a merger, page-9

My sentiment has probably changed over the past 2 weeks after some conversations with people in the industry which makes me doubt the likelihood of Touch growing into a profitable business on its own. There basically was no (senior) sales team - something that the company also highlighted in the 21/12 update. Sales people have been hired, but the results of this remain to be seen while it has increased the cost base in the meantime. Another concern is unconfirmed rumors that some of the current clients aren't very happy with the Touch services. One of them apparently even put a tender out for some of the services currently provided by Touch. Again this is unconfirmed, but comes from people in the industry. I have contacted Touch last week but haven't heard back (they have been pretty busy obviously).

TCH still has some interesting revenue opportunities but we have no idea if these will eventuate and what the scale of those is. If I then consider the increased cost base and stagnant transaction revenue, it is questionable if they can achieve significant revenue growth ultimately leading to profitability. FYI -  the AFY cost of sales for the half year ending Dec 2016 was $1.18m. This will increase but we are not talking 10s of millions here (yet).

Therefore, I am not necessarily sure if TCH was mis-priced on the market and I am not sure if we as shareholders would have made 50% on 1.05 in the coming years if the company continued operating stand-alone.