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$1.07 southern cross payments ltd

Nice effort Neutral

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Green Hornet

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15/12/16

18:00

Post #: 21370595
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Originally posted by neutralopinions ↑

ASX has seen an influx of tech companies in the recent past.
Perhaps the most compelling pick atm is ISX which I feel is ideally placed on cusp of generating a healthy revenue and being issued an e-money licence.
Cash in bank is ~ 8 MIL.

Last CR was at 40 cents for 10 MIL and today's price is 16 cents.

To provide a quick overview , the following mechanism has been a standard practice with ISX

- Sign an agreement with a prospect to provide onboarding, KYC , AML and other services
- Inform the market
- Initiate implementation of ISX api integration on customer platform
- Integrate onboarding with merchant providers ( multiple in most customer cases )
- Beta test
- Go live

Approx time to complete all steps ~ 3-4 months after agreement signing and informing the market.

Agreements

A brief overview of 2 years of agreement is shown below.

Agreements in 2015

View attachment 379664

Agreements In Q1 2016 - 0
Agreements in Q2 2016 - 2
Agreements in Q3 2016 - 4 + NAB agreements
Agreements in Q4 2016 - 5

Here is the kicker. The revenue in 3rd Quarter only involves reporting from Go live states of customers from Q2 and partial integration of Q3. Next quarterly should report much higher revenue.

Revenue

ISX begins to generate revenue from the day it goes live on customer platform. As indicated KYC is charged at $15 per customer and it has some other paydentity and AML services. Industry standard rates for onboarding and KYC services are approx US $50. ISX provides these services at ⅓ the cost. It makes ISX appealing to most customers.

Since the revenue is charged at a rate per customer estimating potential revenue is little easier. ISX has admitted that it has offered some services on a complimentary basis for customer to trial and provide feedback. This has been the reason for next to nil revenue for ISX so far.

The last quarterly indicated that 250K was registered as revenue for upfront payment, licensing fees and other fees.

XM.com has 500K customers and has been in business since 2009.
Since the verification has to be annual , ISX would generate 7.5 MIL in fees by simply providing the KYC services to XM.com every year. Unbelievable right ? Welcome to the world of tech and finance.

I estimate this number to be lower due to tiered or bulk discounting but substantial nonetheless.

ISX also charges a minor fee per every set of transaction (50) which adds further revenue opportunities.

View attachment 379661
Cannacord's estimation for Crownbet revenue for ISX.

E-Money Licence

ISX has applied for a E-Money licence in Cyprus. It was confirmed in Half yearly report that the application was made. E-Money licence are easier to obtain in Cyprus and take approx 6-12 months. SEPAGA in cyprus has been issued a licence on 1 AUG 2016 while having a similar timeline of registration with ISX cyprus. Considering their timelines, ISX decision on E-Money licence should be close.

The E-money licence will help ISX become a payment settler in EU without having to apply for a licence in each country. The number of such providers are limited and it will help ISX capture a lot of retail consumer market.

ISX will then become a virtual card issues means you can use a credit card once and never have to worry about using the same card again ensuring ID theft is difficult.

The sector has significant barrier to entry as it is Fintech. Obviously two men in a garage cannot begin processing payments if and when they decide. Complex licensing and AML regulation make it hard to become a payment provider. This makes ISX offering a little more appealing than other tech companies on ASX.

Directors

Directors in this company have showed what HC likes to call "skin in the game".
Directors have added to their portfolio by on market purchases much higher to today's price.
For a startup to still generate revenue and management that has backed their work by making on market purchases this company looks in a advantageous position to capture good market.

Read their presentation here.

Expand

Nice effort Neutral

ISX Price at posting: 16.0¢ Sentiment: Buy Disclosure: Held
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0 Great analysis

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