Accrelist Ltd - NRA Capital Research 2018-05-31: Riding Full Steam Into Fintech

Accrelist Ltd - NRA Capital Research 2018-05-31: Riding Full Steam Into Fintech ACCRELIST LTD. SGX: 5RJ

Accrelist Ltd - Riding Full Steam Into Fintech

  • Accrelist Ltd. announced several new initiatives and updates on 30 May 2018, including 
    • the proposed acquisition of 10% of AmazingTech Pte. Ltd. AmazingTech is in the provision of blockchain solutions and has recorded cumulative net profit of S$0.1m in the first five months of 2018 since it became operational in October 2017. 
    • The group is currently completing due diligence and it targets to complete the proposed acquisition of 100% of Refresh Laser Clinic, first announced on 23 January 2018, in June. 
    • The group also signed Merchant Agreements with Long Beach Seafood Restaurant, Sim Lim Square, Hong Kong Tea House and China Commodity Market to offer its electronic payments solutions via WeChat Pay on its POS terminals. 

Signing ceremony and corporate update on 30 May.

  • Accrelist kickstarted its payment and retail solutions business on 30 May with the signing up of four merchants onto its WeChat Pay and point-of-sale software and hardware platform. 
  • In addition, it announced that it will be acquiring a 10% stake in AmazingTech a blockchain/smart contract services company.

Targeting Chinese tourists initially

  • As a start, Accrelist’s payment system will offer WeChat Pay, targeted at merchants that service Chinese tourists. This opportunity arises as Tencent wants to raise merchants’ acceptance of WeChat Pay globally, with partners being signed up in e.g. Europe and Malaysia. 
  • With Chinese tourists spending S$4.2 billion in Singapore last year, the WeChat Pay market can be highly lucrative.

Riding on growth of contactless payments and smart retail.

  • We reckon that Accrelist’s larger objective is to
    1. add more payment methods and ride on the growth of contactless payments and
    2. offer new POS technologies to retailers.
  • Currently, industry measures are in place to encourage the use of QR codes for payments, which will likely spur retailers to install new POS machines. In turn, this creates an opportunity for Accrelist to push technologies such as self-checkout machines (e.g. those in use at supermarkets) and self-ordering machines (e.g. those in use at fast food chains) to retailers e.g. food chains etc, in addition to new technologies that utilise sensors and image recognition for checkout and payment.

Starting crowdfunding ambition with aesthetic clinic.

  • As part of Accrelist’s push into fintech, it is also acquiring an aesthetic clinic chain to kickstart crowdfunding. Refresh Laser Clinic is well established with four outlets in Singapore. This acquisition is subject to shareholders’ approval and we will have more information when the circular is released.

Investment in AmazingTech may have synergies later.

  • While we expect Accrelist to be a passive investor in AmazingTech initially, we envisage that AmazingTech can inject its expertise for Accrelist to offer cryptocurrency payments and initial coin offerings for its payments and crowdfunding initiatives in the future.

Subsidiary Jubilee has turned around, but risks remain.

  • We value Accrelist at 1.2 Singapore cents, based on 0.82 cents of contribution from the group’s share of Jubilee and 0.38 cents from Accrelist’s new businesses. We are comforted that Jubilee has turned around; albeit with growth slowing in 2H FY18.
  • Overall, we decided to rate Accrelist Overweight given its holdings in Jubilee Industries Holdings (SGX:5OS). However, we qualify our rating with a high-risk classification, as the new businesses are still in the infancy stage.
  • Headwinds include competition from large incumbents in the payments and POS machine industry in Singapore, mitigated by growth opportunities such as rising acceptance of cashless payments and smart retail.

Liu Jinshu NRA Capital Research | http://www.nracapital.com/ 2018-05-31
SGX Stock Analyst Report Overweight Maintain Overweight 0.012 Same 0.012

* The report is produced by NRA Capital under the ‘NRA Research Scheme’ and NRA Capital has received monetary compensation for this valuation report.