In the transformational and disruptive e-commerce is the payments sector. This has by-passed the lowly rated Mi-Pay (LSE:MPAY).
After 10 year of existence, Mi-Pay is an established a payments enabler and fraud prevention services provider with a focus on mobile top-up and international calling cards.
A key benefit for its long-term clients is Mi-Pay offer many channels making it easier for users to top-up. Additionally Mi-Pay guarantees against fraud as it charges successfully processed transactions and regularly achieve payment success rates of 90% against an 80% industry average.
After a comprehensive ‘reshuffling’ in March 2018 with added new investment at 12.5p its service was developed particularly in the fraud management. Andrew Bowen was appointed as finance director and John Beale moved from finance director to chief executive officer.
The finals to December 2018 when announced in April should show tangible results. In February, a key contract representing 12% of revenue was extended for five years and was also the first client to adopt Apple Pay others are set to follow.
Trading is reported to be in-line with expectations and there should be a positive EBITDA. Payment transaction values are set to increase from £94m to £106m as administration expenses are reduced. Revenue growth is mainly from the improved fraud service.
So the operating loss should be substantially lower at £200,000 from last year’s £622,000 loss. A small profit is likely this year which could become substantial as the market grows. Mi-Pay are supported by some heavy-weight institutional investors with Albion Ventures holding 32%, Helium Special Sits with 17.3% and Octopus with 6%. If a predator was to emerge a ‘good price’ is likely to be negotiated.
Financials
The net company cash is around £600,000 as well as around £2.9m of client cash.
Trading Strategy
There is a double chance of upside; profits growth and stake building in what is a hot sector for corporate activity. Buy
Mi-Pay (LSE: MPay)
10p (9.5p-10.5p)
Mkt Cap £4,6m
Next Results: Finals Wednesday 24th April
By Andrew Hore & Jon Levinson
Andrew has been writing about small companies for 25 years, following the fortunes of many companies, both successful and unsuccessful. He worked at the Investors Chronicle for 12 years, ending up as smaller companies editor. He then went on to write AIM Bulletin and he is currently editor of AIM Journal and AimMicro.com. He is a former AIM journalist of the year and was on the shortlist for the journalist of the year at the Small Cap Awards.
Jon has been an analyst, a journalist, a fund manager and is currently a corporate broker. He will strictly never write on corporate clients. His MBA dissertation was on filling the Smaller Companies Equity Gap. When writing the Penny Share Focus he learned that not all that glitters is gold.
