Balance sheet pressures at Australia-based eServGlobal (ESG) should ease after the company announced a A$16.8m (£11m) fundraising last month. The first tranche, of A$9.5m, will be raised through a placing and subscription and will help fund expansion of HomeSend, the group's international mobile remittances service. A second planned placing will be used to pay A$7.2m of outstanding shareholder loans.
Domestic mobile-money transfers generate the bulk of eServGlobal's turnover, but it's the HomeSend offering - the international version - that generates most investor excitement. Acting as an international hub, linking different networks around the world, HomeSend has bagged a number of heavyweight mobile operator partners lately. These include Vodafone and Airtel Africa, while Xpress Money, a global money transfer business, has also joined. Working with BICS, a global provider of wholesale carrier services, HomeSend is the only mobile-centred international remittance hub endorsed by the GSMA, a lobby group for most of the world's mobile operators.
Progress is also being made at eServGlobal's core mobile money and value-added services division, which targets national markets. In a trading update earlier this year, management said that 15 more customers had been added since last year, including a five-year deal with an Asian conglomerate worth $1.6m (£1m). The company also expects to generate underlying cash profits during the second half, compared with a A$4.3m loss for the previous six months.
Cenkos says...
Buy. With coverage now extending to over 1bn mobile phone subscribers, HomeSend looks set to become the standard for international mobile remittances. The proceeds of the first placing will strengthen the balance sheet, enhance eServGlobal's ability to compete for larger contracts and accelerate the development of more mobile money services. On a sum-of-the parts basis, which includes domestic money transfers, we value the group at 34p a share (on the enlarged share capital). We also see good prospects for share price performance as HomeSend expands. Expect a full-year loss per share of 1.6p (end-October 2011: 4.7p loss per share).
Charles Stanley Securities says...
Buy. Although the Vodafone deal is groundbreaking, we believe it will be some time before that translates into increased subscriber adoption. The main challenge is making sure users in developing countries have the appropriate infrastructure and handsets, so we think Vodafone will use HomeSend to target the more developed markets initially. It's therefore encouraging that Vodafone is due to roll out a near-field communication wallet service in Germany, the Netherlands, Spain, Turkey and the UK from 2013. But it's also worth pointing out that Vodafone generated $203m (£127m) from a domestic mobile payments platform in Africa last year. Such potential leaves eServGlobal as one of our favourite picks in the technology sector.
