In my view there are couple of items of concern and while COVID-19 will inflict some pain IMHO it is not the full story.
Firstly, if we are to look at the integration revenue, which the company acknowledged was similar to that conducted in 2018. Based on the questions from ASX the revenue in 2018 was circa $1M to $1.5M for each project. In the quarter just past the company has announced it performed two integration projects. So we are looking at removing approximately 20% to 25% (2M to 2.5M) from revenue in the next quarter given these are the only two projects they have announced/completed since 2018 they are not a steady stream of revenue.
Add to this the low increase over the quarter of client funds held, indicating the company is struggling to either onboard new customers from a man power perspective or the new customers are cautious to trade with ISX due to the current situation. This needs to be taken into context with previous statements by the company they had a full pipeline of customers waiting and had been working furiously to onboard them.
The last issue is the big issue. We all know from the GFC the financial system is a pack of cards and what keeps it together is the perception of trust and integrity. The statement of VISA stopping processing of transactions and requesting more due diligence suggests the perception of trust in and the integrity of the company is at a low ebb. Which for a company operating at the fringe is highly problematic and needs to be rectified ASAP as it directly affects the companies ability to generate revenue.
Those processing issues were pre-tensed by the covid-19 statements and IMHO lacked a lot of clarity for shareholders, suggesting we do not have all of the facts. Nor do they offer any great insight of any outcomes.
I believe the company is fighting the fire on to many fronts and things are starting/have started to suffer, evidenced by the slippage of important projects.
Possibly the best course of action is for the company to strengthen its board and attempt right the perception of trust and integrity that will allow them to move forward. Unfortunately the same issues can be applied to the NSX transaction, were as a market operator they need to be a shining example of good corporate governance if they hope to turn that business around.
The AGM will be interesting indeed.
Cheers,
ISX Price at posting:
$1.07 Sentiment: Hold Disclosure: Held
