Revenue Group Bhd
(May 23, RM1.22)
Initiate buy with a target price (TP) of RM1.67: Listed on Bursa’s ACE Market, Revenue Group Bhd is a cashless payment solutions provider in Malaysia offering a single platform that provides multichannel payment solutions to different customers. Products and services that the company offer can be divided into three segments, namely deployment of electronic data capture (EDC) terminals, electronic transaction processing and solutions and services related to payments infrastructure.

 
Revenue Group is expected to benefit from Bank Negara Malaysia’s (BNM) target of achieving 25 EDC terminals per 1,000 persons in 2020 (from 16 currently) which represents a 53% growth from current levels. Revenue Group’s recent partnership with Public Bank to roll out the all-in-one Android-based payment terminal signifies their first step in tapping into this huge market opportunity.

Going forward, we expect electronic payment transactions to grow further, as BNM implemented a series of measures to encourage migration to e-payments. Revenue Group’s track record showed that they were beneficiary from this secular tailwind, as transaction value processed by the company increased significantly from RM300.4 million in 2015 to RM1.12 billion in 2018, representing a compound annual growth rate (CAGR) of 55.1%.

Mobile payments are expected to play a significant role going forward and hence we expect continued positive growth in e-wallet space due to intensified merchant acquisition and more aggressive marketing initiatives. Revenue Group is a major beneficiary under this positive trend from terminal sales, increase in electronic transaction volume and growing volume of mobile payment transactions processed via its revPAY platform.

Going forward, we expect the numbers of terminal deployed and electronic transaction volume processed via revPAY will continue to grow due to greater adoption of electronic payment. As a result, we expect core profit after tax and minority interest to grow at a decent CAGR of 28% in FY19 to FY21. — Hong Leong Investment Bank Research, May 23