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KGI initiates 'outperform' on OxPay Financial with TP of 42 cents

Felicia Tan
Felicia Tan11/16/2021 12:57 PM GMT+08  • 3 min read
KGI initiates 'outperform' on OxPay Financial with TP of 42 cents
The target price is based on 25.0 times to OxPay’s FY2022 earnings per share (EPS) of 1.7 cents.
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KGI Research has started coverage on OxPay Financial (formerly MC Payment) with an “outperform” recommendation and a target price of 42 cents.

The target price is based on 25.0 times to OxPay’s FY2022 earnings per share (EPS) of 1.7 cents, according to analyst Megan Choo.

To Choo, the online-to-offline (O2O) financial services technology provider is well-positioned to benefit from the growing e-commerce trend.

The increasing use of e-money with its recent integration of GrabPay and Shopee Pay is also another plus.

See: OxPay to offer ShopeePay as payment option for merchants

“Given that consumers’ shopping preferences are shifting from brick-and-mortar retail malls to e-commerce, the growth of online merchants is expected to spearhead the company’s top and bottom line,” writes Choo in a Nov 16 report.

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“Singapore, Malaysia and Thailand’s e-commerce market have been on an uptrend post-pandemic, where Covid-19 has proven to be a catalyst,” she adds.

Furthermore, OxPay has just been appointed as an exclusive payment provider for F&B Hive Ventures, which has over 4,000 restaurants in Thailand.

The appointment is expected to be a significant revenue contributor from FY2022 onwards, says Choo.

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OxPay’s results for the 1HFY2021 saw a positive core PATMI of $736,000, compared to the $674,000 in the 1HFY2020. While the company saw an overall loss of $29.5 million in the 1HFY2021, the figure was due to the one-time reverse takeover (RTO) expense of $30.2 million.

Another $26.4 million was non-cash in nature, relating to goodwill write-off for the RTO, while $0.2 million relates to a one-time legal fee.

In her report, Choo notes that the payment sector has a high barrier to entry amid a growing target market.

In the highly-regulated sector, OxPay is one of the 19 non-banking companies in Singapore to be awarded the merchant acquisition license as at September.

“Even though international competitors such as PayPal and Adyen have taken up a majority of the market share for established and large merchants, the growing number of SMEs in Singapore is expected to provide room for OxPay’s growth,” she writes.

“OxPay’s target market of SMEs, coupled with its highly accredited license, gives it an edge over other competitors in the SME space, with adequate market share for penetration,” she adds.

As Singapore heads towards a smart nation, cashless payment options have also been on the rise. E-money has grown some 697% since 2017; meanwhile ATM withdrawals has been declining since the same year.

For more stories about where money flows, click here for Capital Section

For more stories about where the money flows, click here for our Capital section

Despite the positives, downward pressure on OxPay’s margins due to a saturated market may pose as a key risk to the counter.

As at 12.57pm, shares in OxPay are trading 0.5 cent lower or 1.72% down at 28.5 cents.

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