Revenue to gain from recovery in core business


MAYBANK Investment Bank Bhd (Maybank IB) expects Revenue Group Bhd to see a recovery in its core business and potentially clinch one of the handfuls of digital banking licenses set to be offered by Bank Negara Malaysia this month. 

The bank, thus, has a ‘Buy’ call on the electronic payment processing solution provider with a target price of RM2. Revenue shares closed at RM1.40 yesterday. 

Maybank IB analyst Shafiq Kadir stated Revenue’s core business in electronic data capture (EDC) terminals and electronic transaction processing (ETP) are expected to benefit from the economic reopening. 

He added the digital ecosystem solutions may solidify Revenue’s position as an e-payment solutions provider while a potential digital bank license award may provide upside to Revenue’s growth. 

The RM2 target price is based on 50 times FY23E earnings per share (+1.5SD). 

The Maybank IB report on Revenue noted the company has displayed encouraging operational metrics in its core business and registered a robust 46% quarter-on-quarter (QoQ) revenue growth in the second quarter of 2022 (2Q22) reflecting Revenue’s exposure to the economic reopening. 

Its gross merchandise value (GMV) growth also accelerated QoQ in 2Q22 to 30% to bring the first half of 2022 GMV to RM1.4 billion, an increase of 24% brought about by higher spending from both online and offline channels. 

Its hardware sales recovered strongly in 2Q22 due to the lifting of movement restrictions. 

The total average EDC terminals in 2Q22 were ~92.8k (+5% YoY). 

“At ~80% of total sales, we expect both EDC and ETP segments to be the main drivers for Revenue’s earnings growth ahead,” the investment bank stated. 

Revenue has been building its WannaPay digital ecosystem since 2019, acquiring digital assets such as insurtech, e-commerce, digital security, remittance and communication to create a comprehensive payments application. 

The acquisitions are intended to channel more payments through WannaPay as it carries higher margins over its RevPay payment gateway with no interchange fees. 

“We learnt that Revenue has been rolling out this payments solution to its existing ecosystem of ~40,000 merchants,” it said. 

The report noted Revenue’s collaboration with UnionPay to provide health declaration services for Malaysian visitors to China might boost the app value proposition and see pent-up usage once China opens up its international borders. 

While the market waits for the conclusion of the digital banking licences issuance this month, Revenue’s management reiterated its intention to be the providers of technology, infrastructure and data analytics to its consortium. 

Revenue believes it can use its significant retail experience to provide underserved markets with data-driven banking products and digital security solutions. 

In terms of potential capital raising requirements, the bank report stated it remains to be seen at this juncture.