Payments, Payments, Payments. The onset of the CoronaVirus has expedited the importance of digital payments companies globally and throw in a little M&A activity and the sector is white hot.
The RBA assistant governor spoke about this earlier in the week and can be found here:
https://www.rba.gov.au/speeches/2020/sp-ag-2020-06-03.htmlThis has led to a global re-rate of such companies & the ASX contributors have not been left behind. From APT, the market leader, through the pack being Z1P, OPY, EML, FLX, SPT & QFE.
I relative unknown in the investor space within the payments game is
Novatti Group (NOV) and it warrants a lot more focus given how advanced of a company it is,
along with its revenue profile, relative cheap valuation & enormous growth potential along its multiple verticals, namely both payments & Neo-Banking.It's specs are as follows:
Novatti Group - NOV
SOI - 173m
Cash - $3m
Mkt Cap - 38m (at 22c)
Top-20 - 74.8%
This fintech specialises in payments processing and cross border transactions. The
flagship business within its stable is the payments processing piece (think a junior version of EML) and this business has delivered record revenues for the 31-Dec half and its forth consecutive quarter of revenue growth. In it's 30-April release they announced yet another record revenue quarter of $3m ending 31-March 2020.
This payments business is underpinned by their payments technology which integrates with
WeChat and Alipay which are two of the most popular online payment platforms in China. Beyond these ultra popular online platforms, Novatti has strategic partnerships already in place with
Bank of Shanghai, IBM World Wire, SendFX, SplitPay and Visa which Novatti holds Visa Principal Issuer Status.Their SplitPay partnership is the technology provider and shareholder of a BNPL company with a UK focus. Given how hot that particular space is at present, this aspect of their business could account for its current market cap in entirety.
Further to their payments prowess, Novatti also has a anti-money laundering string to its bow. Their tech can be easily integrated into other online payment platforms for compliance and reporting purposes and their recent partnership with Rent.Com.Au is a prime example of this along with their soon to be launched digital banking service.
Novatti has also been developing its new banking unit (Neo-Bank) as it seeks to become a banking service provider. It commenced the process with APRA to obtain a Restricted Authorised Deposit Taking Institution (RADI) licence in 2018 and their final submission was sent through in November 2019. Obtaining this banking licence from the regulator will be a further game-changer for this little company.
Novatti is also on the hunt for bolt-on acquisitions in the space which are highly complementary to their recurring revenue model and the acquisition of Emersion Group earlier in the year is a good example of this. Emersion produced revenue of more than $1.7m in CY2019 and was cash flow positive with EBITDA of $300,000. This business has now been successfully integrated and is beating early expectations (announced 3 June 2020). E
mersion integrates with more than 70 software platforms, including majors like Salesforce, Xero and ConnectWise.The tight share structure and apparent lack of historical promotion by the company has led this to be hidden under the radar for a long time, in a long way.
Friday's breakout in price and volume will attract eyes to the stock and IMO this will get the significant re-rate it is due over the coming period.
It is a genuine payments company with real, growing revenues, Principal Issuer Status with VISA and has interests in the UK BNPL space along with advanced negotiations with APRA to obtain a banking licence.Novatti Group - absolutely one to watch.
