eServglobal has long provided merchants in developing countries with the technology that allows millions of pre-paid mobile phone users to top up their phone credit. But the company is now using this installed customer base to provide instant international mobile money transfers via its Homesend platform. As such, it is tapping a vast global market of two billion unbanked people.
- Leveraging existing customers
- Experienced bosses
- Still loss making
- Speculative
eServglobal already has a solid mobile money business, which includes electronic purchasing via an e-wallet, domestic money transfer, and pre-paid top-ups, which account for 75 per cent of its revenues. But its newer international remittance business aims to leverage on the existing vendor network to offer international money transfers that bypass banks completely (although transfers are still checked by anti-money-laundering agencies).
ESERVGLOBAL (ESG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 22p | MARKET VALUE: | £43.3m | |
| TOUCH: | 21-22p | 12-MONTH HIGH: | 36p | LOW: 19p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 10p | NET DEBT: | 13% | |
| Year to 30 Jun | Revenue ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2010 | 147.2 | -29.1 | -20.1 | nil |
| 2011 | 42.8 | 45.1 | 19.8 | nil |
| Year to 31 Oct | £m | £m | p | p |
| 2012* | 24.4 | -2.20 | -1.27 | nil |
| 2013* | 29.3 | 1.80 | 0.66 | nil |
| % change | +20 | -182 | -152 | – |
Normal market size: 9,000 Market makers: 8 Beta: 0.6 £1=AUS$1.497 * Charles Stanley forecasts | ||||
While six billion of the world's population have a mobile phone, only four billion have a bank account and it's not easy for the non-banked to transfer money. Sending money in parts of the developing world still involves popping cash in an envelope and passing it on until it reaches its destination. Not exactly safe, but cheaper than paying Western Union a 17 per cent fee. However, under Homesend, users go to a shopkeeper and hand over the sum they want to transfer to their recipient. The money is then transferred to the mobile wallet of the recipient, who can pop along to a local shop and pick up the cash. eServglobal provides the technology behind the transaction, and for that it charges 4.5 to 6.5 per cent per transfer. Homesend, already has 358m subscribers largely because four large mobile phone operators - Lycatel, MTN, Qtel and Tranglo - have signed up.
Management expects the international remittance market to be worth over $1trillion a year by 2015 and new bosses have been parachuted in to make sure eServglobal gets a piece of the action. Chief executive Craig Halliday and chief technical officer Paul Beesley have joined from Australian software provider Mincom, alongside chief financial officer Stephen Blundell, who was previously the finance boss for emerging markets at Adobe and Siemens. And with half of sales recurring as a result of software-as-a-service agreements with mobile operators and sales and maintenance contracts, there is good reason to think eServglobal should achieve analysts' expectations of turning a profit in 2012.
