Malaysia Stock Analysis - REVENUE (0200)

Founded in 2003, Revenue Group Berhad (Revenue) is a provider of cashless payment solutions in Malaysia. Revenue has more than 15 years of experience in the electronic payment industry in Malaysia.

It offers a wide range of technology-led multi-channel payment solutions through its platform revPAY for different customers, including banks, non-banks, brick-and-mortar merchants and online merchants.

Revenue was launched on Bursa's Ace Market on July 18, 2018. On the day of listing, the stock price rose from IPO price RM 0.37 to RM 0.625, an increase of 69%. As of today, the stock price is still continue rising.

3 Main Business Areas:
1) EDC terminals business (accounting for approximately 60% of turnover)
The main job is to provide the EDC terminal's distribution, deployment, and maintenance services.

Source of income:
a) Rent the EDC terminal to the customer to collect the rent every month.
b) The EDC terminal's maintenance service collects maintenance costs every month. Sell EDC terminal and some of its spare parts.
c) Electronic Transaction Processing business (accounting for approximately 30% of turnover)

2) Electronic transaction processing services for Credit Cards, Debit Cards and Electronic Money Payment Scheme, Revenue as Acquirer, Master
Merchant ("MM") or Third-Party Payment Processor ("TPP").

Source of income:
a) Earn Net Merchant Discount Rate ("MDR") by processing electronic transactions through the EDC terminal.
b) Earn pre-determined commissions by processing electronic transactions through the E-commerce/Mobile Channel.
c) Earn a share of Net MDR as a TPP or MM.

3) Solution & Services business (about 10% of turnover)
It mainly provides solutions and services related to payment gateway, payment network security and payment infrastructure.

Source of income:
a) Sales, R&D, and licensing software, payment network security, and related hardware, including repair services.

At of now, the company's business is mainly focusing in Malaysia. As a local and international brand of Card Schemes and an Acquirer for the e-money payment scheme, the company undertakes the Merchant Acquisition service and allows them to accept cashless payments at home and abroad. Among them are MyDebit, UnionPay, Diners Club, NET S, JCB, Alipay, Boost and Touch n’Go. In addition, the company also serves as the MM for Visa and MasterCard.

Since Revenue was only incorporated in September 2017, the performance of FYE2015 to FYE2017 is based on the comprehensive historical earnings of Revenue Harvest and its subsidiaries. In the past five years, the company's turnover and profit (before tax) have consistently broken new peak record. The average annual growth in turnover and earnings over the past five years was 42.5% and 42.6%. It is a very impressive growth rate.

The company's Profit Before Tax (PBT) Margin averages 24%, which is higher than its competitors. And the company's FYE2018 PBT increased by 8.9% compared with FYE2017, and PBT Margin fell from 32.3% to 26.4%. But in fact, the company has a one-time profit in FYE2017 (selling investment properties) and FYE2018 has a one-time expense (listing costs).

Assuming that all these one-off gains are deducted, the company's PBT and PBT Margin at FYE2017 are RM 6.86 mil and 25.9%; on FYE2018 PBT and PBT Margin are RM 9.83 mil and 27.8%. In conclusion, the PBT of FYE2018 has actually improved by 43% year-on-year!

The FBT of FYE2019 also includes a one-time cost. Assuming deduction, PBT is RM 12.4 mil, up 26% year-on-year.

Overall, the company's performance is very good and continues growing. Revenue is indeed a very potential company, mainly because of its potential in the industry and management capabilities.

Although Revenue's industry is highly competitive, in the absence of cash, Revenue's ability will give you a share of it. As the owner of Revenue said, the company's biggest competitor is not the other peers, but "cash."

Louis Yap

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