OxPay Financial - KGI Securities 2021-11-16: Cash Is No Longer King


OxPay Financial - Cash Is No Longer King

  • OxPay Financial is an online-to-offline (O2O) financial services technology provider with a fully integrated platform that allows both online and offline merchants to run and grow their business easily.
  • Initiate coverage on OxPay Financial with Outperform and S$0.42 target price. OxPay Financial is well-positioned to benefit from the growing e-commerce trend and the explosive use of e-money with its recent integration of GrabPay and Shopee Pay. The appointment of OxPay Financial as exclusive payment provider for F&B Hive Ventures, which has over 4000 restaurants in Thailand, is expected to be significant revenue contributor from FY22 onwards.

OxPay Financial - Company overview.

  • OxPay Financial (SGX:TVV) is a FinTech group that is principally engaged in the provision of Merchant Payment Services (MPS) and Digital Commerce Enabling Services (DCES) with a focus on servicing merchants in the retail, transportation and food and beverage industries. The company has business presence in various parts of Southeast Asia, namely, Singapore, Malaysia, Indonesia and Thailand.
  • OxPay Financial was previously known as MC Payment, prior to the reverse takeover by Artivision Technologies in February 2021.

OxPay's 1H21 financials: Positive core PATMI.

  • Even though OxPay Financial incurred losses of S$29.5mil in 1H21, this was due to one-time reverse takeover (RTO) expense of S$30.2mil. S$26.4mil was non-cash in nature, relating to goodwill write-off for the RTO, while S$0.2mil relates to a one-time legal fees. Eliminating the RTO expenses, OxPay Financial's core PATMI stood at S$736k, relatively flat compared to S$674k in 1H20.

High entry barriers; growing target market.

  • The payment sector is highly regulated, serving as high entry barriers to the digital payment space. OxPay Financial is one of the 19 non-bank companies in Singapore to be awarded the merchant acquisition license as of September this year. 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 Financial’s growth.
  • OxPay Financial’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.

E-commerce driving digital payments.

  • 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 OxPay Financial’s top and bottom line. Singapore, Malaysia and Thailand’s e-commerce market has been on an uptrend post-pandemic, where COVID-19 has proven to be a catalyst.

Rapid expansion in 2021 and beyond.

  • Since the RTO and boardroom refreshment, OxPay Financial has been aggressively expanding both its revenue segments. The company set up contactless digital ordering and payment solutions, as well as cloud operating system for Eatbox, a food hall which opened in September this year. GrabPay has been added as a payment option for all Watsons stores in Singapore and in early November, the company has started to offer Shopee Pay as payment option for merchants in Singapore, Malaysia and Thailand.
  • Moving forward into FY22, OxPay Financial’s appointment as the exclusive payment provider for HIVE Ventures, Thailand’s first integrated food ecosystem, is expected to be a significant revenue contributor.

Cash is losing touch.

  • As Singapore heads towards a Smart Nation, cashless payment options have been increasingly rising, with e-money capturing the most aggressive growth of 691% since 2017. ATM withdrawals, which we used as a proxy in determining consumers’ usage of cash, has been declining since 2017, inversely related to the surge in digital payments.

OxPay - Valuations and peer comparison

  • As OxPay Financial does not have any Singapore-listed peers, we have used Malaysian-listed peer, GHL Systems and international peers Adyen, Paypal and Square for comparison.

Regional peers: GHL Systems Berhad.

  • GHL System’s solution services segment offers payment solutions through sales and services of network devices, outsourced payment networks, management/processing of payment and loyalty cards as well as internet payment processing. Its transaction payment acquisition offers e-pay services and card payment services. Lastly, its shared services segment offers sales, rental and maintenance of EDC terminals, and other card acceptance devices and the supply of cards to banks and other payment operators.
  • GHL is currently trading at a historical P/E of 67.9x and P/B of 4.5x. The company is in a profit-making position and revenue growth has been gradual and steady, achieving a 31.8% growth from FY17 to FY20. As of the company’s latest results, gross and profit margin was 41% and 9.4% respectively.

International peers: Adyen.

  • Adyen is a Dutch payment company that allows businesses to accept e-commerce, mobile, and point-of-sale payments. It is listed on the stock exchange Euronext. Adyen offers merchants online services such as accepting electronic via credit cards, debit cards and real-time bank transfers based on online banking. The technology platform acts as a payment gateway, payment service provider and offers risk management and local acquiring.
  • Adyen is currently trading at a sky-high historical P/E of 204.2x and P/B of 55.3x. Similar to GHL, Adyen is in a profit-making position and achieved an impressive revenue growth of 259.7% from FY17 to FY20. As of the company’s latest results, gross and profit margin was 18.3% and 8.4% respectively.

US-listed peers: PayPal, Square.

  • PayPal operates an online payment system in majority of countries that support online money transfers and serves as an electronic alternative to traditional paper methods such as checks and money orders.
  • Square is a commerce ecosystem, offering services such as managed payment services and software solutions. Square also provides hardware to facilitate commerce for sellers, which includes magstripe readers, as well as contactless and chip readers. PayPal and Square are trading at a 72% to 450% premium to our target valuation multiple for OxPay Financial.



  • Downward pressure on margins due to saturated market.

Megan Choo KGI Securities Research | https://www.kgieworld.sg/ 2021-11-16