Yuanta (FS) on M Cash Integrasi (MCAS IJ)
Indonesia Digital Distribution Hub
We visited M Cash Integrasi (MCAS), one of the leading players in digital distribution business. Since its IPO in Nov-17, MCAS is now one of the most rapid growing players in Indonesia digital space. In this report, we highlighted some of the management’s key strategies.
Building end-to-end digital distribution infrastructure... MCAS positions itself as a touch point for online transaction through four distribution channels, namely: Cashiers, Apps/Chatbots (via Line and Telegram), Digital Kiosk and Digital Wholesale Networks. Out of these four channels, Digital Wholesale Networks is MCAS’ main distribution channel, contributing ~90% of total MCAS revenue through ~36,000 digital agents (as per Jun-18), while the rest are mostly derived from its digital kiosk (~1,700 machines per Jun-18).
… to distribute an expanding list of digital products and services. Currently, MCAS main product is the telco electronic voucher (comprises of ~90% of the company revenue, with margin of around 1.5%-2.5%). The other digital products include: biller and payment point, transportation (airplane, train ticket), entertainment (concert and show), games voucher, Top-up voucher (Grab, e-money, etc). These products mainly served the massive number of Indonesia unbanked population, which don’t have the access to the mobile banking services. However, in the future MCAS will expand its products and services to cater to the middle-class population as well.
Optimizing the infrastructure with use cases. In the future, MCAS plans to add fintech (alternative payment, etc), transportation, logistics and retail, telco wholesale network, digital exchange hub and microelectronics to develop a complete digital ecosystem. Most of these plans are already in the development phase, in line with the company timeline (figure 4).
Strategic alliances to accelerate market penetration and expansion: MCAS expanded its digital products and services mainly through strategic partnership as well as selective M&A activities. Its strategic partners include some notable business entities such as: Alfamart, Pos Indonesia, Kawan Lama Group and many other businesses that synergize with MCAS’ digital ecosystem. While in its M&A activities, MCAS selectively acquire companies which can enhance its products offering and/or synergy with its existing business, without paying significant premium over the acquisition.
Exponential business growth and strong financial position. MCAS revenue/net earnings target in FY18F is IDR3.5-4.0tn/IDR70bn, implying ~174%/789% YoY revenue/net earnings growth this year thanks to MCAS’ strategic acquisitions. MCAS’ distribution channels also expanded significantly with total Digital Agents grew by ~25% ytd and digital kiosk grew by ~110% ytd. Meanwhile, MCAS balance sheet remained healthy with net cash position of IDR7bn.
Valuation. The company is currently trading at 33x of its annualized P/E, a 200% premium vs Forth Smart (FSMART TB): 11.8x P/E, which have similar business model with MCAS’ Digital kiosk, but with smaller earnings growth vs MCAS.
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