In Mint Condition For Profit Breakthrough
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Mint is arguably poised for big growth, and Asia is the focus of its attention. The addressable market is huge – the company says the global mPOS terminal market will grow at a compound annual growth rate of 32 per cent from 2015 to 2019.
“Fintech,” or financial technology, has been a smoking-hot space in the technology world in recent years, and the payments area has been where much of the heat has been generated. Mint Payments Limited (MNW) has been in the middle of that kitchen, developing its mobile payment technology platform.
From its start on the stock exchange – as Mint Wireless Limited – in August 2007, with a portable device and software system installed on mobile personal digital assistants (PDAs), Mint Payments (which changed to the current name in December 2104) has expanded its technology into an omni-channel platform that enables businesses to accept, see and reconcile payments – whether by credit card, debit card and EFTPOS – regardless of whether they have a bricks-and-mortar shop, an online store or if they run a mobile business.
Mint was the first Australian company to come up with a chip and mobile payment product. In 2013, Mint Wireless' online, real-time "chip and PIN" mobile payment technology – modular, scalable and operational on a payment card industry (PCI)-compliant bank-grade platform – arrived on the market, signing its first bank deal with Bendigo Bank in July of that year.
But the first really big deal was a five-year deal signed in August 2013 with small business accounting software company MYOB, under which MYOB distributes, licenses and integrates Mint’s mobile point-of-sale (mPOS) payment system with MYOB’s software.
The next big signing came in July 2015, when Mint Payments inked a deal with global online payment gateway provider eWAY to license Mint’s “card present” capability to distribute its own mobile point of sale solution. eWAY’s 20,000-plus merchants are able to accept the full spectrum of card payments including Visa and MasterCard, as well as EFTPOS through popular payment methods such as Apple Pay, Contactless, Chip & Pin and Magnetic Swipe.
eWAY’s mPOS solution consists of eWAY’s mobile application, integrated with Mint’s software application (Mintegrate) and the Mint card reader hardware. Mint derives ongoing revenues from monthly fees, merchant service fees, transaction fees andhardware fees.
In September 2015, Mint struck a deal with market-leading taxi booking and payments app goCatch to market Mint’s payments terminals to the Australian taxi market. The initial pilot targeted part of goCatch’s base of 35,000 registered taxi drivers (representing more than half of the national total). It’s expected that a broader future rollout of the Mint payments terminal to goCatch drivers will see a deeper integration of Mint’s mobile payments solution into the goCatch driver app, further streamlining the in-cab payments experience.
Then, in December 2015, Mint signed three agreements with New York Stock Exchange-listed First Data Corporation, covering:
- Distribution by First Data of Mint’s card present mobile point of sale (mPOS) solution to its resellers and merchants;
- Mint’s new acquiring partnership in Australia for its omni-channel payments solution; and
- Mint to use First Data as a transaction-switching provider, thereby allowing Mint to provide its solutions to any financial institution or enterprise merchant connected to First Data’s payment processing network
The First Data deal helps Mint to strengthen its position in the Australian and Asia-Pacific payments market, whilst bolstering the distribution and capabilities of Mint’s payment solutions.
In February 2016, Mint signed travel agency software solution provider Tramada Systems to a three-year licence and distribution agreement, under which Mint will deploy its fully integrated payment processing “Minternet” service into Tramada’s network of 300-plus travel agencies across Australia and New Zealand, which process about 3 million travel bookings a year, representing about $4 billion of travel spending. Through the use of Minternet’s application programming interface (API) software, Tramada has developed an integrated credit card module (tramada Payment Gateway) that will be offered to all of its customers as a core product offering within Tramada’s suite of travel agency software solutions. Mint will receive a share of the merchant acquiring services and transaction fees, as well as a monthly fee charged to each travel agency.
A major deal followed in March, with Mint expanding its reach into South-East Asia by entering into master services agreements with Asian Business Software Solutions (ABSS, MYOB’s Asian arm), under which ABSS will distribute, license and integrate Mint’s omni-channel payments solutions with MYOB Asia’s branded SME software products. Mint will receive an annual license fee from MYOB Asia and a proportion of the monthly and transaction fees from the users of the Mint Payments solutions incorporated into MYOB Asia’s branded software products throughout Asia.
MYOB Asia will also license Mint’s entire product suite to deliver an omni-channel payments solution to the South East Asian region. The agreement, with an initial term of three years, covers 11 countries: Singapore and Malaysia are the primary markets, where MYOB Asia is the leading accounting solutions provider, with more than 300,000 business customers.
In April, Mint followed that up with a second deal to bolster its expansion into Asia, signing a strategic partnership agreement with Singapore’s most widely used electronic payment option, NETS (Network for Electronic Transfers). NETS is a scheme operator, processor and acquirer, processing S$23 billion ($21.9 billion) in transactions annually. It is owned by Singapore’s largest banks, DBS Bank, Overseas-Chinese Banking Corporation Bank (OCBC) and United Overseas Bank, and is designated as a national payment system by the Monetary Authority of Singapore (MAS).
The five-year agreement (with five year renewal options) will see Mint deliver Singapore’s first NETS-branded unified mPOS solution, enabling merchants to accept both NETS and credit/debit card payments. By partnering with NETS as a transaction switching provider, Mint will be able to provide its entire suite of omni-channel payments solutions to its channel partners – for example, MYOB Asia – and to financial institutions or enterprise merchants in Singapore.
For its rollout and implementation of the mPOS solution with NETS, Mint will receive upfront implementation and hardware fees, a recurring monthly fee from each merchant using the system and a share of all transaction fees.
Mint is arguably poised for big growth, and Asia is the focus of its attention. The addressable market is huge – the company says the global mPOS terminal market will grow at a compound annual growth rate of 32 per cent from 2015 to 2019. In 2015, there were 13 million mPOS terminals, or 17 per cent of the global POS terminals population of 75 million terminals: in 2019, Mint estimates that there will be 54 million mPOS terminals, or 46 per cent of the 114 million global terminals fleet.
Further, the payments processed by mPOS will grow from $70 billion in 2015 to $300 billion in 2019, by which time the Asia-Pacific region is expected to be the largest mPOS market by 2019.
Mint has entrenched its payments platform across its existing distribution partners and customers in this region. It says revenue growth – and the road to profitability – of its Australian and New Zealand businesses are underpinned by existing distribution partners and customers through the increase in adoption of Mint’s omni-channel product suite, and its focus on higher-volume transacting merchants in Australia and New Zealand, which should boost both user uptake and average revenue per user.
The upside comes from Mint’s expansion into high-growth Asian markets, by successfully implementing its license and distribution partnerships with ABSS and NETS in South East Asia. The company expects these investments to build into recurring, high-quality revenue streams, as Mint’s full suite of omni-channel products is rolled out across the critical markets such as Singapore and Malaysia.
The upshot of these deals is that Mint has reached a point where the market expects FY17 to be the year that sees Mint Payments break through into profitability. On Thomson Reuters’ collation, the analysts that follow the stock have a consensus expectation of 0.2 cents for earnings per share (EPS) this year, rising to 1 cent in FY18.
At the share price of 7.7 cents – which capitalises Mint at $44 million – those estimates price MNW on a price/earnings (P/E) ratio of 38.5 times expected FY17 earnings, but a far more interesting P/E of 7.7 times expected FY18 earnings. Dividends are not foreseen, but if the profitability starts to flow as the analysts that cover the stock expect, Mint Payments is priced at a steal.
James was founding editor of Shares magazine, and oversaw one of the most successful magazine launches in Australia. He has also written for BRW, Personal Investor, The Age and Management Today, and was subsequently personal investment editor at The Australian and editor of financial website, investorweb.com.au