Goldpac: Discussion Points And Comments

Dear Readers,

Thank you for your interests in the articles on Goldpac (金邦达:3315.HK)  and your points raised. For the benefit of the other readers, some discussion points and comments are reproduced here.

If this is your first visit to this blog, you may want to read the previous postings on Goldpac before proceeding with this write-up.

Previous Posts:

31 July 2017 - Goldpac: Is There Gold in Goldpac?

16 September 2017 - Goldpac: Operating Profit Increased 16.3% For First Half 2017, But Net Profit Hit By Exchange Loss

30 September 2017 - Goldpac: Scored Double First As Selected Provider for New OTO Initiatives To Improve the Banking And Payment Ecosystem 

The discussions here contain the opinions and ideas of the author. It is not a recommendation to purchase or sell the securities of any of the companies or investments herein discussed. Please refer to the disclaimer found at the bottom of this page.
 

Discussion Point 1: Goldpac is hoarding huge cash, is it a bane (or a boon)?

Comment:

The ROE of Goldpac is actually significantly under-stated due to the huge cash holdings which are not invested to generate business income.

However, having huge cash holdings may have the following significance:

(a)    Prudence spending by Management

Goldpac raised HK$975M in late 2013 IPO.

 

Amazingly, HK$345M (35%), mostly related to R&D, expansion of production facilities and future strategic M&A, still remained unutilized as of end 2016. This demonstrates the prudence on the part of its Management in making new investments and there will be ready cash to deploy once good investment opportunity arises.

 

In January 2017, Goldpac has announced the acquisition of a piece of land in Zhuhai and the development of Goldpac Fintech Innovation Hub to grow its Fintech business. (Refer to more information here)

(b)    Highly cash generative business

Since IPO, from 2014-2016, Goldpac had generated a total of RMB813M in operating cashflow while cumulative CAPEX over the same period was RMB117M, giving a free cashflow of RMB696M. This is almost 40% of its current market capitalization!

 

This shows that Goldpac is a highly cash generative business with low maintenance CAPEX. In fact, Goldpac has invested a lot on technology to improve its manufacturing process and has recently signed a strategic cooperation with Infineon to improve its production through Industrial 4.0.

(c)      Rewarding its shareholders and sustainability of dividends

Goldpac had been paying its shareholders dividends every year since IPO. In fact, it has been raising its dividend per share each year and special dividends had been introduced since FY15. 

 

From 2013 to six month ended 2017, a cumulative dividend amount of RMB351M had been paid. With high free cashflow, it is likely that Goldpac could continue to reward its shareholders with dividends. Also, Goldpac had executed share buybacks in 2015 & 2016 and cancelled a total of 1.4 million shares. 

From these actions, it can be seen that Management had been returning excess cash to the shareholders.

 

In fact, Goldpac was honored with the “Best Shareholders’ Return” award in the 2016 Golden Hong Kong Stock Award Competition which recognized the Group’s profitability and consistent dividend policy. (Refer to Chinese article here)

 

Discussion Point 2: Mobile payments such as AliPay and WeChat Pay are growing rapidly in China. Will credit card be skipped altogether?

Please refer to comments under Discussion Point 3.

Discussion Point 3: Would NFC (Near-field communication) payment replace credit card payment?

 

Comments:

China has managed to frog leap and skip certain stages in its technology adoption due to the lack of historical baggage as it did not previously have huge existing infrastructure in place for payment devices as compared with other developed countries. Thus China can rapidly set up NFC enabled payment systems in its MPOS network without the need to replace huge existing network. In addition, the high adoption rate of smart phone in China has enabled usage of mobile payments such as AliPay and Wechat Pay to grow rapidly for small amount payments through the use of QR codes. AliPay and Wechat Pay have been offering small discounts and Hongbaos (lucky draws) for its users and these have worked well to attract users. These developments have generally reduced the usage of cash, especially in the cities.

So is credit card dead? From the feedback of some PRC friends working and living in China cities, the answers gathered from were resoundingly “NO”. They have commented that most of the people working in China cities do own credit cards and they do use it for the following purposes:

i) for higher value purchases

ii) to get longer repayment period
iii) overseas travels for hotel & purchase payments

It is interesting to know that even students from better known universities are being offered credit cards even though they do not have any income yet. Basically, it is not a binary outcome between ewallets and credit cards, they are different modes in the payment ecosystem that can co-exist, and both aimed at replacing cash transactions.

Compared with NFC payments, it should be noted that credit card also provides an additional important function - CREDIT i.e. lending during payment process, and not just solely to facilitate payment. Mobile payment and credit card payments are different mode of payments with different features, it all will work together to move into cashless society.

Click here for Chinese language interview with Chairman of Goldpac in Nov 2016 on why he thinks e payment cannot completely replace bank card payments.

Discussion Point 4: Debit cards have been replaced, why can’t credit card be replaced by virtual credit card?

Comment:

Debit cards have NOT been replaced. JD.com has just jointly issued its first internet banking card with China Industrial bank and Goldpac has been appointed as the major supplier. (Refer to article here)

Goldpac has also just been appointed to issue a bluetooth ready bank card which can link to mobile phone for download payment apps.

 

There are evidences of e-commerce players and financial institutions using bank cards to link with internet banks & mobile phones to improve O2O connectivity. More importantly, they have chosen Goldpac as the provider of these initiatives and this illustrated Goldpac's leadership in the industry.

You may refer to write-up on the above New OTO Initiatives here.

Currently, none of the major credit card organisations has issued virtual-only consumer credit card. It is highly possible that the credit card networks (VISA, Mastercard etc) & credit card acquirers (banks) still want to be on "top of the wallet" for marketing visibility rather than to be hidden in mobile phones.

Physical bank cards are used as a marketing tools for the banks, clubs and merchants, by portraying income and status differentiation via the criteria used for qualifying each type of credit cards. In China, in order to attract users, the banks have partnered with Goldpac to issue innovative bank cards such as LED smart cards and Sound smart cards. Moreover, the costs of issuing bank cards only constitute a small portion of the overall costs of the banks according to Goldpac.

 

Discussion Point 5: What are the competitive advantages of Goldpac?

Comment:

Advantage #1 – High entry barriers to industry

-      Stringent security, qualification and certification requirements

-     Card manufacturers must have five years of relevant production experience to obtain certification from payment organisations

 

Advantage #2 – Only Card Provider Certified by six leading credit card organisations

 

-     Goldpac is the only card provider in China that is certified by all the 6 leading card issuance organisations ; Visa, Mastercard, Amex, Unionpay, Diners & JCB

 Advantage #3 – High switching cost for customers/ long relationship with customers

-     Goldpac has worked many years with banks in China and counts top banks like ICBC, BOC, ABC & CCB as its customers

-     Over the years, it has expanded its business relations to foreign banks as well as non-banking customers such as Starbucks.

-     Card issuers are reluctant to change card manufacturers frequently due to security and trust issues

-     One non-executive Director was a board representative nominated by BOC group

-      Long time relationships build trust and enhance the chance of winning new business, e.g. providing Fintech solutions to banks

Advantage #4 – Strategic partnership with major supplier

-     Major supplier, Gemalto holds 18.42% share interests and has nominated a board representative in Goldpac

-     Gemalto is the world leading supplier of IC chips and digital security provider

-     According to Management in an investors communication meeting held on 20 April 2017:

Goldpac and Gemalto are important strategic partners. We form powerful combination in the business level and increase the bargaining power and market ability. Gemalto attaches importance to the company`s growth in China market and overseas development. In overseas markets, although the two companies have some competition, we have different market advantages. Goldpac has more advantages in the international development of UnionPay products and in Southeast Asia market. Because of the needs of risk management, the world`s banks are trying to avoid centralized procurement, so the company has great development and cooperation opportunities in overseas markets.

Advantage #5 – Strong Innovation Capability

-      25% of total workforce of 1,600 are engaged in R&D. Invest ~7% of revenue on R&D

-      Collaboration with Wuhan University on IoT solutions

-      Collaboration with Infineon on Industrial 4.0 to improve productivity and cost efficiency

 

 

Evidence: Goldpac won numerous awards for its product innovations over the years, including:

-     GCaas, its Fintech solution for banks and financial institutions

-     ICMA Elan Award, which is the Oscar’s equivalent for the industry

-     Goldpac was selected as major provider for first ever internet savings bank card issued under the partnership between JD.com and Industrial Bank as well

-     Goldpac was selected as major provider for the first Bluetooth bank card

 

Discussion Point 6: What are the opportunities Goldpac’s business?

Comment:

1.       Low Credit Card Penetration Rate

According to estimates, the credit card penetration rate in China is only less than 0.32 per capita compared to 4-6 per capita for debit cards. If conservatively, the credit card penetration rate can increase to 1 per person, then the addressable market is more than twice the current size.

2.       Entry by VISA, Mastercard card and other credit card organization into China

Moreover, due to WTO agreement, China is opening up its domestic credit card market to allow foreign credit card networks such as VISA & Mastercard into China market. Once they entered, it is expected that credit card issuance will increase. The competition for credit card market will intensify and it is likely to bring down the credit card charges and credit card interest rates. This will simulate the growth of credit cards as a form of payment financing.

3.       Low EMV migration rate in Asia Pacific & China UnionPay Belt & Road Initiatives

EMVCO has set a deadline for mandatory migration of existing magnetic stripe credit card to EMV compliant standard for better security.

According to EMVCO statistics, the EMV card adoption rate in Asia Pacific is only 38.8% percent in 2016. Goldpac has made inroads into South East Asia, in particularly, Philippines to take advantage of the EMV migration and it has also set up Fintech operations in Singapore. In 2016, the overseas sales is only RMB103M or less than 8% of its annual sales. The migration to EMV standard is expected to accelerate as the EMVCo deadline approaches.

4.       Growing Recurring Income from Payment Card Replacement Market

Credit card expiry period is typically set at 3 to 5 years due to credit review required on the card holder by the banks. This provides a future recurring income to the providers for credit card replacement market. So even at zero growth, based on the current financials, Goldpac can easy continue its high dividend payout given its low maintenance CAPEX requirement.

 
5.       Growing Innovative Payment Products & Fintech Business

While the current card solution business can be seen as a steady growth cash-cow business, the Star for rapid growth would be its Innovative Payment Products & Fintech business.

                            

Goldpac has developed an award winning Fintech technology for banks and financial institutions, GCaaS, which uses cloud based technology to integrate secured e-commerce, business management and linked up card issuers, merchants and cardholders in data processing.

Goldpac CTO, Li Jun, briefing on Goldpac’s GCaaS at the 2016 AliCloud Fintech Summit

 

In one interview, a Goldpac executive had mentioned that the company is in a good position to leverage on its relationships and trust developed over many years with the PRC banks to implement secured Fintech solutions to help them rationalize their costs. Of the 1,600 workforce in Goldpac, 400 of them are engaged in R&D for secure payment solutions including Fintech.
                                              

High-end Garmin Smart Payment Sport Watch supplied by Goldpac to China Industrial Bank.

According to estimates by HIS Markit reported in Goldpac’s announcement, the wearable market size in China was expected to grow to RMB20B.

In the six months ended 2017, the sales of wearables products was near RMB10M. As both wearable payment products and Fintech solutions are still at its early growth stage at Goldpac, there are great potentials to develop these businesses in years to come.

For a company that is ranked first in China and fourth in the world in the financial cards industry, Goldpac is trading at near 2x ex-cash PE (TTM) at current price. (view valuation here)

For new posting alert on this blog, please click on the link below:

Subscribe to Hunting For Value by Email

 

 

Previous Posts:

31 July 2017 - Goldpac: Is There Gold in Goldpac?

16 September 2017 - Goldpac: Operating Profit Increased 16.3% For First Half 2017, But Net Profit Hit By Exchange Loss

30 September 2017 - Goldpac: Scored Double First As Selected Provider for New OTO Initiatives To Improve the Banking And Payment Ecosystem
 

Stock Sniper's Portfolio For September 2017

Read about Stock Sniper's Portfolio HERE

 

Transactions For Sept 17:
1. Goldpac: Added more  at lower price than initial purchase price after the analysis of the half year results 

Reasons for purchase:
- Taking the opportunity in weakness of share price to add more after sell down in the aftermath of its first half results. Revaluation gains/losses are non-operating in nature. Operationally, its results seem satisfactory
-  Management announced more details in its future plans to develop its Fintech business. The Fintech and smart payment wearable businesses could be a wildcard for future growth
- Strong innovation capability and leadership. Read Goldpac: Scored Double First As Selected Provider for New OTO Initiatives To Improve the Banking And Payment Ecosystem
- Trading at around 2x ex-cash PE. Valuation updated HERE

What I might not like:- The overseas revenue contribution is still small

2. Hopefluent: Added more at higher price than initial purchase price an analysis of the half year results

Reasons for purchase:- Better than expected half year results despite the property cooling measures imposed by the local government
- All business segments are growing well
- Huge increase in interim dividend. I love it!
- Co-founders continued to purchase large quantities of shares from open market at higher price
- Still high MOS with Net cash/share at HK$2.18. Valuation updated HERE

What I might not like:
- Possible increase in credit risks exposure from its growing Financial Services business. However, management expressed optimism in this business and the risks are controllable. Need to watch this business carefully going forward.
- Possible more property cooling measures? But I ready to accept this risk since this is to make the market growth more orderly and sustainable over long term. Share price weakness from such measure may even offer opportunity to buy the shares at cheaper price. 
From the above two transactions during the month, it seems that I have averaged down on Goldpac and averaged up on Hopefluent. Does dollar cost averaging work? Well, I like to find out too. We shall review this strategy in time to come.  

Connect @ Facebook

Read Disclaimer

Goldpac: Scored Double First As Selected Provider for New OTO Initiatives To Improve the Banking And Payment Ecosystem

 

Goldpac has a slew of developments since its results for the six months ended June 2017 (view commentary here). Among the announcements, notably there are two major developments:

 (1)    First Internet-DrivenBanking Card - JD Gold Card

JD Finance, the internet finance arm of the major e-commerce player, JD.com, collaborates with China Industrial bank, to issue the first internet-driven banking card in China, the JD Gold Card.

This marks the first move by a major e-banking player to issue bank cards for capturing wider offline opportunities and clearly demonstrates the relevance of banking cards in providing a swift and convenient switch between the online and offline domains (“O2O”).

With its wide capability and reputation, Goldpac has been appointed as the major one-stop provider for this pioneer initiative.

(2)    First Multi-industry Application Mobile Payment Bluetooth Card (“One Card Pay”“壹卡付”)

This smart card enables cash withdrawals, general offline payments and in particularly, payments for public transportation such as buses and subways. Notably, it can download apps via Bluetooth link with mobile phones thus potentially increasing its applications to other platforms (e.g. enable payments in other cities’ transportation system, petrol card etc).

With this single smart card, it realizes the Internet-Plus transformation for payment cards and reduces the number of cards that consumers need to carry by creating a single multi-purpose smart card with scalable add-on functions through Bluetooth technology. This initiative yet is another move to enhance the O2O connectivity in the banking and payment ecosystem.

深圳市华移科技股份有限公司董事长兼CEO肖正君先生、 广东华兴银行深圳分行行长盛红明先生、深圳市深圳通电子商务有限公司董事长王东军先生以及金邦达有限公司总经理兼首席战略官李远刚先生参与了签约仪式并发表讲话。(From left, representatives are from CNMOBI, Guangdong Huaxing Bank, ShenZhenTong and Mr. LI Yuangang, General Manager of Goldpac Limited)

As a demonstration of its innovation capabilities in the mobile finance domain, Goldpac has been selected by Guangdong Huaxing Bank, in collaboration with CNMOBI and ShenZhenTong, to be the provider to deliver this innovative product.

With the above two new OTO initiatives using the smartcard technologies, interactions from both Online-To-Offline as well as Offline-To-Online directions have been greatly strengthened and the banking and payment ecosystem is further enhanced.

Goldpac, being selected as both the provider for China’s First Internet Bank Card and First Bluetooth enabled Bank Card, clearly illustrates its leadership position in the industry and its technology capabilities.

For a company that is ranked first in China and fourth in the world in the financial cards industry, Goldpac is trading at near 2x ex-cash PE (TTM) at current price of HK$2.55. (view valuation here)

For new posting alert on this blog, please click on the link below:

Subscribe to Hunting For Value by Email

 

Previous Posts:
31 July 2017 - Goldpac: Is There Gold in Goldpac?

16 September 2017 - Goldpac: Operating Profit Increased 16.3% For First Half 2017, But Net Profit Hit By Exchange Loss

New Post:07 October 2017 - Goldpac: Discussion Points And Comments
 

Goldpac: Operating Profit Increased 16.3% For First Half 2017, But Net Profit Hit By Exchange Loss

Goldpac had announced its six months results for period ended 30 June 2017. Its revenue had a rather flattish growth of 1.4%. While this growth rate may seem to be negligible, it represented a stabilization of the revenue after suffering a 17% last year decline due to the issues mentioned in the initial write-up here.

 

However, the net profitable attributable to shareholders decreased by 15% compared to the corresponding period last year. This was mainly due to the exchange loss of RMB20.3M resulted from the currency translation of its huge cash balance in USD as RMB strengthened against USD. Excluding the effect of exchange loss, the net profit would have improved by 21.5% to RMB101.5M.  The company has been maintaining large cash balances in USD for potential M&A and overseas investments.

BUSINESS RESULTS 

While the revenue remained flat, it is notable that the expenses had reduced by 17% due to higher marketing channel development expenses for new products and solution business in same period last year. Management of cost structure improved this year and there were rental savings after acquiring a property for office use in HK instead of leasing it. Other income had been boasted by an increase in VAT refund in China. Overall, its operating results improved by 16.3% against same period last year.

 The GP% was maintained at 30% despite the competitive pricing for card shipments due to cost efficiency from volume scale and efforts in production automation. The huge exchange loss had caused the net profit margin (%) to drop by more than 3% when compared to last year. Despite this, the Trailing-Twelve-Month (TTM) ROE was still above 10%.

Balance Sheet:



Goldpac remained debt free and had a significant amount of cash that is more than 79% of its market capitalisation at the current share price.

Key Financial Ratios:

  

The company maintained healthy current ratio and cash ratio and the cash conversion cycle improved significantly.

Dividend

An interim dividend of 4.0 HK cents per share for the six months ended 30 June 2017, which is the same as last year.

BUSINESS COMMENTARIES

Compared to the interim results in 2016, the performance of the Group’s two operating segments for the period was relatively stable.

Embedded Software and Secure Payment Products

-       Turnover of was RMB561.0 million, representing an increase of approximately 2.0%. The Group witnessed an increase of 11% payment card shipments and a surge in credit card shipments of 38% in the first half of 2017.

-       Shipments for overseas banking card organizations increased by approximately 15.0%

-       While card shipments had increased, the turnover value had raised by a slower pace mainly due to the competitive pricing strategy adopted by the Group to win market share as it was able to maintain its GP% by having economies of scales and greater automation in manufacturing.

Platform and Service

-       Turnover was about RMB130.0 million, representing a slight decrease of approximately 1.3%

In the first half of 2017, the Group realized a notable achievement with regards to the diversification of payment product range:

-       Luxury GPS payment watch achieved a turnover of nearly RMB10.0 million

-       Stylish LED card saw a turnover of over RMB10 million

-       Smartphone case with an embedded payment chip was delivered for an internationally recognized non-banking brand client. The stylish while practical smartphone case enables this client to set up its own payment ecosystem. Since the launch of the case as a seasonal gift, it has received widespread recognition.

MANAGEMENT’S VIEW ON BANKING CARD INDUSTRY & COMPANY’S PROSPECTS FOR 2017

-       At present, the diversification of payment methods is mainly limited to the small payment amount domain, and does not pose a challenge to the current banking card system. Third-party payment platforms (such as AliPay and WeChat Pay) should play a complementary role with banks in the small amount payment domain. The synergies between banking card payments and third-party payments, both online and offline, will boost the robust development of China’s financial payment industry.

-       According to Nilson Report published in January 2017, global card transaction volumes in 2025 are projected to increase by 2.7 times compared with that of 2015 while the increase in the Asia-Pacific region will be even higher at 3.9 times. This suggests a steady and sustainable growth potential for the banking card payment segment.

-       At the end of the first quarter of 2017, the credit card per capita in China was approximately 0.32, which was only 1/10 of that of developed countries and regions. The continuous development of the consumer credit system in China contributes to fast-growth phase of China’s credit card segment. In the first quarter of 2017, total amount of credits on credit cards in China amounted to approximately RMB9.85 trillion, an increase of 32.2% compared to same period last year. Based on these observations, the diversification of payment methods did not bring major changes to payment system, which remains dominated by banking card.

-       At present, China UnionPay (“CUP”) is accelerating its development within China’s “Belt and Road Initiative” countries. The Chinese government, adhering to its WTO commitments, is gradually opening up the banking card clearing market. Consequently, overseas organisations start to build their banking card business in China independently with VISA being the first applicant to apply for establishing a banking card clearing organisation in China. It is anticipated that crossover expansion of CUP and overseas card organisations internationally and domestically will create more business opportunities for the Group.

Company’s Chinese commentary on future prospects (click link here):

The Group is very confident of its future developments. The China Government has increased its emphasis on financial security and will further improve its financial monitoring and control systems. This will provide more opportunities for the Group. Credit card business is expected to sustain its steady growth. The Group will provide innovative and customized solutions to its customers in the banking sector to create enhance value for them.

COMPANY’S EFFORT IN DRIVING GROWTH

1.    Driving growth through innovative Research and Development

-       The Group achieved major breakthrough in the R&D of its national security chip by successfully passing the 2016 annual review by Ministry of Industry and Information Technology of China and it outperformed the 2016 objective of this national project. The Group is currently entering into strategic cooperation with China’s leading domestic secure chip manufacturers to further enhance the R&D and application of the national financial IC chip, but will also accelerate the pace of overseas expansion.

-       Strong R&D capabilities of the Wuhan University - Goldpac Joint Laboratory, the Group made significant progress in the development of IoT (Internet of Things) secure chip. The Group’s proprietary SuperCOS secure chip can be deployed in a number of segments including wearables, machine authentication, ID authentication, smart home and smart city. It is expected to attract favorable and expansive business opportunities with the rapid rise of the IoT industry, laying the cornerstone for the development of the Group in the future.

-       The Group will accelerate its application in intelligent manufacturing and cloud technology to strengthen and expand its leading advantage in the smart secure payment. Integration with operating systems of financial institutions, government and other organisations through its cloud platform will be speed up in order to form a strong bond to strengthen customer viscosity and provide wider range of service. Intelligent operation will be implemented to reduce the use of manpower, increase operation efficiency and decrease operating cost through the systematic and digital integration of operation facilities.

Capitalizing on its cloud platform, the Group will establish its financial data personalization center in the northern China to improve the Group’s geographical presence as well as the Group’s support and deliver capabilities.

2.    Focusing on developing overseas markets

-       Goldpac will accelerate its overseas expansion efforts in sync with CUP’s expansion plans. Currently, the Group is providing products and services to 23 countries and areas. It has currently has presence in Philippines and Singapore.

(Source: www.emvco.com)

-       South Asia region provides vast market potential given the large population of the area and the slow card migration rate to EMV (Europay, MasterCard and Visa) according to the EMVCo statistics. The migration is expected to pick up as deadline approaches. In Philippines, BSP, the Central Bank of Philippines has issued an order on 16 June 2017 that all banks there have to issue EMV compliant card by Jun 2018 or face a fine.

-       Goldpac is setting up a representative office in Mongolia, which allows the Group to be closer to Central Asian markets which is still largely untapped.

3.    Developing Goldpac Fintech Innovation Hub

-       Goldpac is actively driving Fintech innovation, exploring creative financial service models and accelerating mergers and acquisitions. The Group believes that Fintech has become one of the mainstream drivers for the financial industry. More financial institutions are embracing Fintech actively and integrating cutting-edge technologies such as the Internet, Big Data and Cloud Tech.

In 2016, the group acquired a piece of land in Zhuhai City, located at the heart of the Guangdong-Hong Kong-Macau Greater Bay area, to develop Goldpac Fintech Innovation Hub (“Hub”). Construction of the Hub has commenced and is expected to start operation in 2020. With this Hub, the Group will build up the following three innovative centers:

(a)   Smart Secure Payment Industry Chain Center

To develop strategic cooperation and integration among the upstream and downstream industry along the value chain, in order to put forward the innovation of the smart secure payment industry and to build a regional industry center.

(b)  Fintech Center

To focus on new development in Fintech innovation and the integration of creative models in the financial industry, the Group will leverage modern technologies, such as Artificial Intelligence and Big Data, to establish new models for data platforms, data processing and creative services, and to create synergies within the Group.

(c) Guangdong-Hong Kong-Macau Greater Bay Innovative Talents Center

The Group will leverage the geographical advantages of the Guangdong-Hong Kong-

Macau Greater Bay and capitalize on the governmental support to attract creative talents from all over the world to the Guangdong-Hong Kong-Macau Greater Bay Innovative Talent Center.

OTHER DEVELOPMENTS SUBSEQUENT TO JUNE 2017

(i)            In August, JD.com announced the cooperation with Industrial Bank to issue bank debit cards. This marked the first move by a major e-commerce player to issue payment cards for off-line use. Goldpac was awarded as a major provider of solution for this first-ever internet savings bank card in China, which offers comprehensive financial services inclusive of savings, wealth management and commerce for cardholders. Could other internet banking giants like Alibaba and WeChat follow the suit to issue bank cards as well?

(ii)           On 13^th September, Goldpac announced strategic cooperation with Infineon Technologies help to further elevate the smart operation capabilities of Goldpac through the leveraging of their experience and knowledge of Germany’s implementation of industry 4.0.

VALUATION

* Inclusive of 6 cts HK special dividends paid. Dividend yield will be about 4.8% excluding special dividends

(RMB/HKD exchange rate: 1.19)

Based on the Discounted Cashflow Model (DCM), assuming an ultra-conservative growth rate project of ZERO percent based on TTM (which includes RMB20.3M exchange loss) and a discount rate of 4% over the 10 year period, the IV is worked out as follows.

 

 

Given its long working relationships with many major banks and Financial Institutions, it should be watched closely if Goldpac’s Fintech initiatives, such as its award winning GCaaS Cloud platform which offers one-stop-shop integrated business management, centralized data task processing as well as smart card application services, could be adopted by them and if so, this would propel the company into the next phase of growth and business domain.
 

For a company that is ranked first in China and fourth in the world in the financial cards industry, Goldpac is trading at just 2x ex-cash PE (TTM) at current price.

For new posting alert on this blog, please click on the link below:

Subscribe to Hunting For Value by Email

 

 

Previous Post:
31 July 2017 - Goldpac: Is There Gold in Goldpac?

 

New Post:

30 September 2017 Goldpac: Scored Double First As Selected Provider for New OTO Initiatives To Improve the Banking And Payment Ecosystem

 
07 October 2017 - Goldpac: Discussion Points And Comments