I had previously detailed the Payments revolution & what it...

I had previously detailed the Payments revolution & what it means for digital payments companies like little Old Novatti & it's now time for a refresh given so much has happened in the last 6 months.

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 year and can be found here: https://www.rba.gov.au/speeches/2020/sp-ag-2020-06-03.html

This 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. Recently, we have seen new additions in to the space by the way of CRO, IOU & DOU

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 - 222m
Cash - $11m
Mkt Cap - 60m (at 27c)
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 26-October release they announced yet another record Annualised Gross Transaction Volume of $2.3B+ which led to a record revenue quarter of $3.56m ending 31-September 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, SplitPay and Visa which Novatti holds Visa Principal Issuer Status. It should also be noted that on 29-Sept Novatti launched a digital payments accelerator to "meet increasing market demand" as an extension of its VISA Issuing Program.

In late June, Marqeta (A global payments leader who already partner with Afterpay, Square, Uber, Affirm, Instacard & Doordash) selected Novatti to be their lead prepaid payment card platform as they expand in to Australia. At the time of their announcement, Marqeta had issued 140m cards globally and is a multi-billion dollar business, domiciled in the USA.

Given 3 months have passed since the marriage of Novatti & Marqeta, I am expecting some very exciting developments via some very large scale launches of cards. Marqeta play with the big boys & NOV now has the head seat at that table!

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. On 11th August, APRA advised that these licences will begin to be issued in March 2021 after being on hold during the CoronaVirus.

Douugh (ASXOU) made a stellar debut on to the ASX earlier this month and currently enjoys a >200m mkt cap as the ASX-Listed Neo-Bank with a partnership with mastercard. Novatti's RADI licence, if issued in March 2021 will mean that they are on the same regulatory wave-length and NOV already partners with VISA among many other super-majors in the payments space.

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). Emersion integrates with more than 70 software platforms, including majors like Salesforce, Xero and ConnectWise and on 4-Sept Salesforce cleared emerson for launch on its GLOBAL MARKETPLACE

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.

In late June, NOV undertook a $10m capital raising to fund its growth ambitions & anecdotally, it seems, the majority of those recipients were traders looking for a quick stag, rather than investors looking for a long term payments company investment.

Nonetheless, the breakout in price and volume attracted 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.

Further reinforcement that professional investor eyes are looking at Novatti as the next big thing by way of fintech on the ASX, this very morning Alan Kohler (via his Eureka Report publication) put together a fantastic interview with Peter Cook (NOV MD) about their expansion plans in to the USA. If you have time, it's well worth the read / listen via this link - https://www.eurekarepor.com.au/inve...-to-expand-billing-automation-business/148875 (note i've deleted the 'T" on eurekareport in the web link so that HC won't moderate it - add it back in to your web browser when searching)


Novatti Group - absolutely one to watch. It's been a frustrating hold, but IMO the time has come!