I intentionally deleted previous blog to come out with proper presentation for better understanding on the same subject. Analysis here is based on my opinion while the actual facts and figure are extracted from available public information. This article is also to answer haters’ and doubters’ questions.
What is PUC up to?
As we all heard the news, its subsidiary, EPP Solution has received the green light from BNM to issue electronic money (e-money) via its mobile application, joining a list of more than 20 other non-bank Malaysian entities to be allowed to do so. The approval from BNM is for the large scheme, which is determined by the purse size and outstanding e-money liabilities. EPP Solution is required to launch its e-money scheme within one year from the date of the central bank’s approval letter.
For more info on e-money, click link here (https://www.bnm.gov.my/microsite/ps/gl_016_3.pdf)
From the date of approval, do you think PUC will be able to launch its e-money product within stipulated time?
They are not new to e-payment business. PUC's been in e-payment for quite some time. Everything is already in the plate. It is just about to serve it to the public. The company has the talent pool to boost the company’s e-commerce and financial technology-related business. PUC will introduce new first of its kind e-commerce and payment services to the market in the near term. I am sure the product will be launched this year.With this e-money, it will take PUC to greater level and this will be game changer to PUC’s earnings.
Looking at other players in the industry, such banks, as Mpay, touch ‘n go and GHL systems, what is PUC’s strength to compete?
The advent of e-money has become disruption to banks, so they are also in the learning stage. Unlike PUC, banks are new in e-payment. Meanwhile, Mpay has been loss making due to lack of infrastructure and technology. Touch ‘n go’s in this line also at infancy stage. In addition, both MPAY and touch ‘n go offer e-money product in the form of prepaid card and online. The only real deal to PUC is GHL Systems in Malaysia.
I think PUC’s electronic payment business is comparable to GHL Systems. Both have connection with China’s e-commerce companies. Unlike other players, I believe PUC’s key strengths are lies (1) on its new e-money large scheme product that can be offered widely to anyone and extend to millionaires too. (2) PUC’S targeted market can also comes from overseas particularly in China. PUC has collaboration agreement with Lakala Payment Co., Ltd, where PUC has been appointed as the sole authorised agent in Malaysia to jointly set up a cross-border financial platform for online financial and payment services. Lakala is one of the authorised companies in China to obtain payment license for all categories issued by the central bank of China. (3) Its e-payment product will be mobile app or something similar to WeChat.
That’s why I like to PUC compare with China’s Tencent rather than GHL Systems. WeChat is a mobile chat app owned by China’s Tencent Holdings Ltd, introduced a digital money-transfer feature dubbed e-hongbao. With this feature, users can transfer cash to e-hongbao from debit cards linked to their WeChat accounts. The packets are then sent via WeChat to recipients.
If we take as an example only 1% of Tencent’s net profit as of June 2017, CNY7.8 billion (RM5.1 billion), PUC’s net profit that will be come in from e-money would be around RM50million in the next 24 months. This will be DAMN huge profit. This segment will be major contributor to PUC’s earnings in the next 24 months.
Despite the robust development of e-wallet locally, Malaysians still lag behind in terms of a universal wallet, which saves users the hassle of carrying cash. So, how PUC can make profit from this?
Yes it is true. But that was in 1900s and 2000s, which we had black and white screen phone. So, that kind of question is not valid anymore in this fast evolving technology environment. Technology advancement has helped to propel the adoption of e-money. We are now in smartphone and internet of things era. We will be having iphone 8 and Samsung and many more that will propel the adoption of e-money. In the next 24 months, no one can imagine what kind of technology advancement we would have more. This massive usage trend of advanced smartphone and internet of things will help PUC to garner higher profit than people ever expected. In addition, this e-money is regulated, so means, BNM is expecting the trend.
How readiness is PUC’s e-payment in this industry?
They are well prepared to future hurdles. They have learnt the weakness of their peers, for example, banks, who are still learning e-wallet, MPAY who has been loss making. So, PUC has the capacity, capabilities and resources to expand its e-payment’s infrastructure and technology. If you read its last week announcement, the Company proposed to vary the utilisation of the remaining proceeds raised from the rights issue last year to fund and invest in infrastructure costs in relation to the development and maintenance of the e-commerce platform, sales and marketing expenses and other operating expenses related to the business expansion. They are well-equipped for the challenges ahead!
Where do you think PUC would be in the future?
In a nutshell, PUC can become a leader in e-payment system in Malaysia, surpassing GHL Systems as well. PUC will become a disruption to banks in Malaysia. Its media and advertisement is being gone through digitalisation stage. So, this segment proportion as major contributor will reduce as once e-money kicked in.
In fact, I strongly believe in the leadership of Cheong Chia Chou, Group Managing Director of the Company who will be supported by the existing management personnel. If you look at his background, he has his private company, called Pictureworks that ranked no.3 in Asia and no.5 in digital imaging industry. At young age, he has capability to take the Company to the eye of the world.
Who ever thought Jack Ma, the rejected guy became a billionaire with his Alibaba. Same goes to PUC.
Cheong has Enovax and Pictureworks, which complement each other and now can leverage it for e-money business. He has strong technical know-how support team and marketing from Enovax and Pictureworks.
As I mentioned many times, PUC is Giant in the making.
Last words, what do you think about its share price?
It is UNDERVALUED. Given e-payment alone could conservatively fetch RM50 million in the next 24 months, this segment could contribute EPS of 2.2sen, fully diluted. So, if we discount it to present time (DCF method), EPS would be around 1.99sen. By pegging to PE 20x, which still much lower than e-payment industry, this segment is worth 40sen. So, PUC as the Group could be worth after taking into consideration valuation for Enovax, media and advertisement and solar recurring income.
Are you too optimistic with your assumption?
Not at all, I have been too conservative in terms of earnings and valuation than what people thought. So, you can imagine PUC’s share price should be worth more than 40sen or 50sen. So, LIMIT UP is possible soon. LIMIT UP!
If I were in your position, I would not want to miss PUC. I would close my eyes, grab as many as much as fast as I can!
it is normal to see up and down by half sen at this current price level. It is due to irrational investors like to trade. The true investors will enjoy the LIMIT UP!
http://klse.i3investor.com/blogs/warrenbuffet/131824.jsp
