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My Thoughts for the weeks ahead, page-6

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TonyIndo

11,715 Posts.

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02/11/16

10:51

Post #: 20303771
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Originally posted by martyw ↑

Good Morning
I have just finished a quick review of my holdings in TSN and thought I would share some of my thoughts:

Firstly, I was reviewing the email correspondence with Gary posted here: http://hotcopper.com.au/posts/17864038/single
Questions sent to Gary in May (in black) and his replies (in red), received 25/5/16.

Are the two revolutionary systems about to launch throughout India (UPI & BBPS) high on TSI/TSN's priority list to be a part of? If so, what will this mean for the two companies? Whilst our business is not reliant on UPI nor BBPS for immediate growth, they do form part of our strategy going forward. It only enhances TSI’s opportunities and we closely monitor the programs progress. Please note that user acceptance is a big piece of this puzzle. We will continue with our immediate growth opportunities with our managed services platform – however we are concurrently working on the use of the UPI and BBPS systems and the role it can play in TSI’s continued expansion. We are well positioned to take advantage of the government initiatives both in payments and financial inclusion.

Of the 30 banks that TSI are now working with, how many have been'approved in principle' for the BBPS and if so, what will this mean for TSI India? Over 10 banks – and we only need one to partner with. Many banks will connect to the BBPS service – like banks connect to the ATM network, but many banks will outsource the payments function as’ like ATMs, bank don’t see “bill collection” as a core business function of a bank. A bank makes the most money on lending money followed by making money on bank account floats. We are in discussions with a few banks on this principle.

Is entering the mobile commerce space one of the main objectives moving forward for the company? How will UPI & BBPS play a role in TSI/TSN's plans? Mobile services – yes. BBPS only plays a role in being a common platform so there is no infrastructure build costs for individual companies.

What are your thoughts on Blackstone acquiring Mphasis? Will this provide greater opportunities for TSI India? I think is enhances TSI India’s position – now we have considerably more scale we are attracting interest from not only Indian companies, but outside as well.

Does TSN currently hold any valuable IP in its own name? No – TSI India does.

Prior to the Mphasis deal, TSI India were serving a collective database of over 230 million customers. With 30 plus banks now added to the mix, plus existing Utilities and Institutions, would that figure be close to half a billion customers now? Yes – my personal opinion is, it is likely higher.

Next I refer you to this post: http://hotcopper.com.au/posts/18384953/single and what I said then (in blue is what I still have my eye on) ….

Good morning

I was just reviewing my investment strategies for the next 6 months and this caused me to review the main announcements this current financial year by TSN. These have been:

3/3/16 – Agreement to add 11,000 ATMS (http://www.asx.com.au/asxpdf/20160303/pdf/435l0dzfpkyhfs.pdf)
15/3/16 – Win e-surveillance tender (http://www.asx.com.au/asxpdf/20160315/pdf/435v4s973193s2.pdf)
8/4/16 – 11,000 extra ATMs now effective notice (http://www.asx.com.au/asxpdf/20160408/pdf/436cyrtq813w8j.pdf)
2/5/16 – Operations Update: TSI India (http://www.asx.com.au/asxpdf/20160502/pdf/436ykfjrnbyg1y.pdf)
28/6/16 – Strategic tie up with SREI (http://www.asx.com.au/asxpdf/20160628/pdf/4385bsqzj6p1pb.pdf)

A couple are still very much in the forefront of my thoughts:

15/3/16 – First Public Sector Bank Tender (with Andhra Bank) for surveillance at 500 ATM sites, 5 year contract with a fee per month.
Also, informed shareholders that e-surveillance rolled out at 500 of its own ATM sites (PNB) with a saving of over 55% compared to guards.
Also noted that a trail has begun with Laxmi Vilas Bank which, if successful, will result in roll out at 900+ sites.

2/5/16 – Annual revenue forecast at A$53m + per annum.
Transaction volumes expected to exceed 500m transactions per annum.
11,000 ATM deal expected to be EBITDA accretive from day 1 and will also support better efficiency in other areas of the business
Explained the value of the Managed Services Platform and the additional services that can be offered.
Updates on the progress regarding e-surveillance and power management were provided.
Explained how bill payments business will grow in the current year assisted by the managed services platform
Updates provided on financial inclusion initiatives in India and the opportunities this presents for TSI.

28/6/16 - Agreement to provide SREI a complete ATM outsourcing platform. SREI have a licence for 9,000 white label ATMs.
Pilot will take place by August for 50 ATMS and the model will be a cost plus model.
This model will include financial processing and switching and has been designed in conjunction with the NPCI (National Payments Corporation of India).

I then went on to say………

So what has the share price done in this period? Let’s look at the price just before each announcement and today:
3/3/16: 2.2c
15/3/16: 3.5c
8/4/16: 3.6c
2/5/16: 2.9c
28/6/16: 2c
28/7/16: 2c

So what does this all tell me?
Basically, the business has grown astronomically during the past 5 months and yet the share price has retreated. But why?
The main cause appears to be a lack of understanding of the business by many and also the exit of a couple of key players during this period (due to boredom it appears!). This has been coupled with some people’s concerns over the lack of control of TSI by TSN and the future ownership structure.
Therefore, I am hoping for clarity around the future direction in this regard (eg TSN will acquire more than 50% of TSI within x months - my preferred option) and I am also looking forward to an update on progress with the current trials mentioned above and any new contract wins.

I can’t help but feel that this is all being forgotten with the current focus on a potential CR but to me the underlying business is flying and I expect to start receiving updates on this very, very soon …. To quote a response from Gary to one of the questions in May:

Is there anyway the market can be kept more informed about any progress in any area or even lack of progress? Or will this be the role of the new TSN CEO? The lack of information is not a function of TSN or me as CEO – logically why wouldn’t I want to give more details, greater updates and provide a stronger marketing presence? Refer answer to Q.11. – I hold 10% so it would be more motivating to me to give the market more – not less. However, currently, TSN is an investment company that holds 25% of TSI India and TSI India is a private company. CX are quite guarded and there is no motivation for them to allow us to provide information to a public market in Australia. If TSN increased its positon to let’s say - at least a controlling one, we would be very keen to provide updated and relevant information on a consistent basis.

I then went back to Tony Indo’s post of June 16 (http://hotcopper.com.au/posts/17989766/single)
And I considered this paragraph:

Products that TSI have ready for the market (refer to company website):

* Card Products (pre-paid card instruments).
* E-surveillance asset business lines outside of ATM surveillance.
* ATM Power Management and asset business lines outside of ATM Power Management.
* POS Terminals.
* Smartphone Technology (e and m-commerce / remittances).
* Big data driven MIS Systems for Analytics.
* Card Issuance.
* Card Management.
* Payment Services.

A lot of these are forgotten by the market when they look at TSI as providing ATMs only.

So what do I see ahead?

In a word “news” (big news to be more specific)! The news flow since June has been “light on” IMO and this is completely understandable given the current discussions with CX Partners. However, I forecast an end to this drought in the not too distant future and I expect a lot of surprised people (with the exception of Tony maybe! lol) as to how much the business has grown.

The key management of TSI have been pushing hard to get more ownership in TSN, the due diligence is a “formality” IMO (I see it as just a means to get the figures audited ready for presentation to anyone TSN is approaching for funding) and India is growing rapidly – I forecast a bumper harvest ahead for all shareholders.

Enjoy your day.

MartyW

Expand

Thanks for the great summary Marty. Lot to look forward to. I feel these past six or so months are playing out just like a few years ago, when the share price was hovering around 0.004c for a good year or more yet the company were ticking many boxes.

As for ATM business, below are the metrics I collated from the company's Annual Report. They look a lot different to the 500 million plus transactions metric and $55m annual run rate on current business highlighted in the Investor Presentation.

http://hotcopper.com.au/threads/sre...803724/page-160?post_id=20226743#.WBknUPp97IU

What else is highlighted on page 31 in the Annual Financial Report?

That an average of 133 transactions per day have been estimated to go through TSI India's existing ATMs prior to the Mphasis deal. I'm going to work this out on the assumption that the full 2,300 ATMs are now online.

* 133 transactions per day x 365 days x 2,300 ATMs = 111,653,500 transactions per year.

* NOTE: Transaction volumes assumed to increase 8% YoY over the forecast period 2018 and 2021.

Now take a look at the same page of that report and you will note that TSI India's fleet of ATMs with new contract with Mphasis as 157 transactions per day has been forecast for the financial year ended 31 March 2017. That's 24 transactions higher per day than TSI India's existing fleet. This might not seem much on first glance but when you do the calculations as I have done on the total number of machines you will understand the sheer magnitude of this exercise.

* 157 transactions per day x 365 days x 11,700 ATMs = 670,468,500 transactions per year.

* NOTE: Transaction volumes assumed to increase 8% YoY over the forecast period 2018 and 2021.

Therefore (111,653,500 + 670,468,500 = 782,122,000 transactions) has been forecast for the financial year ended 31 March 2017.

782,122,000 x $0.104 = $81,340,688 (annual revenue run rate) has been forecast for the financial year ended 31 March 2017.

As you can see the recent Investor Presentation is out by 257,122,000 transactions per year and annual run rate of $26,340,688 per year!!

782,122,000 - 525,000,000 = 257,122,000.

$81,340,688 - $55,000,000 = $26,340,688.

If this is 1 business line, then what's 10 plus business lines going to look like? That's all I have my attention on.

Tony

TSN Price at posting: 2.2¢ Sentiment: Buy Disclosure: Held
14 Upvote

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