“TSN” - Transaction Solutions International Limited
Market Cap - $56M
Price – 2.9 cents
TSi FY17 annual rev – circa $70-80M + additional ES revenue
TSN holds a 24.89% equity interest in Transaction Solutions International (India) Private Limited (“TSI India”). During the last 6 months of operations TSI India continued to focus on aggressively building its core business in India, being the deployment of automated teller machines (“ATMs”) for large Indian banks, operating its new acquisition of a managed services platform and began the process of delivering its own in house Intellectual Property for e-surveillance and power management. The business model is based on the provision and management of approximately 15,000 ATMs and bill payment solutions to major Indian banks and utility companies in exchange for a fee per transaction or a cost plus financial model, paid directly by the banks and utility companies, with 80% weighting towards the recurring revenue, fee per transaction.
TSN has an option to acquire the ~75% balance of TSi from CX Partners for 2.44Bn INR (circa $48M AUD) – 21/10/16.
Good afternoon,
Please have a quick read of this article, relating to security guard costs at Indian ATM sites:
What I would like to draw your attention to is the last paragraph, where “the banks were in the process of providing Electronic Surveillance System round the clock at ATMs. This mechanism was far more responsive than security guards.”
Now, if we recall from announcement on 15/3/16 (“TSI India Wins E-Surveillance Tender”)TSN mentions that banks will potentially save in upwards of 55%+ in costs of physical guarding (guards on site) - http://www.asx.com.au/asxpdf/20160315/pdf/435v4s973193s2.pdf
As the article above also mentions, the specific bank in the article is currently spending 11.72 crore per month on 3605 ATM’s, which works out to be roughly $640 per month per ATM site.
Now, TSi currently have a fleet of 15K ATM’s (owned / operated) and around 800 of them currently have ES operating, therefore leaves a balance of 14,200 ATM’s without ES.
If we look at using that $640 figure on the balance of 14,200 ATM’s = total annual spend by the banks that TSi manage ATM’s for is - $109,056,000.
Now if we look at the average saving that TSN has mentioned (as above) of 55%, then we could say the banks would save circa $59 million per year across the 14.2K sites.
The cost is now reduced to $288 per month, which presumably is the figure TSi would charge their existing clients to operate ES per month.
Now, refer to my roadshow note (attached) from July, 2016, where I made a mention of the following:
-/ E-Surveillance:EBITDA Margins are sitting at 30-50% - TSi in-house IP therefore controlling margin return required -TSi to gain from 30+ bank clients in the e-surveillance space
If this is the case, then of the $288 per month that TSi could be potentially charging per ATM site, at least $87-144 (let’s say $115 flat) will fall to the bottom line for TSi, a total (on 15K ATM’s) = $1.725M per month or $20M per year in recurring revenue.
Now that the Mphasis platform is also in full swing, TSi can leverage off it’s 35+ banking relationships and roll this ES product on not only the existing 15,000 ATM sites, but to the 50,000 ATM’s that the platform is able to support - http://www.mphasis.com/paymentServices.html
TSN Price at posting:
2.9¢ Sentiment: Buy Disclosure: Held
