Goldpac teams up with China Mobile on 5G!!

12 בנוב׳ 2019

Goldpac is super cheap with net cash covering most of market cap, trading at 22% FCF yield, and pays out 7% dividend yield.

Company is the leader in china making credit cards / payment systems. Founded in HK in 1993 and listed at the end of 2013, Company is the largest supplier of financial cards in the greater China region with a market share of appx. 20% in China. Company's business has covered more than 1,000 domestic banks, more than 40 overseas banks, more than 200 government projects, more than 100 transportation projects and more than 50 retail customers. Company is China's first and only supplier which is certified by six of the world-leading credit card organizations. Company was a compounder with rev and EBIT growth 18% and 10% respectively. Company generates very high FCF conversion at 84% conversion versus. NP. Company has no debt and only net cash amounting to 78% of mkt cap. LTM FCF yield to EV is extremely strong @ 60%.

1. Just announced! Combo with China mobile is huge opportunity!! On November 8th, Goldpac and China Mobile(Zhuhai)formally signed the strategic cooperation agreement, to co-build the first 5G+Fintech innovation demonstration base in the Greater Bay Area (GBA). With the constructive collaboration, Zhuhai Fintech Center is expected to be the benchmark of the 5G+Fintech application in the GBA. The two sides will enhance the synergy to promote the application of 5G technology in the field of Fintech, and empower the enterprises in Zhuhai Fintech Center with more 5G deployment. According to the agreement, the two sides will capitalize the innovative management and the service business development to jointly explore the deep integration of 5G, Internet of things, cloud computing, big data, artificial intelligence, virtual augmented reality and other technologies with Fintech so as to realize the 5G application and innovative ecological upgrade in the Zhuhai Fintech Center. Aiming at improving the networking of the infrastructure, refining the construction and management and releasing the potential of service function and intelligentizing the industrial development, the center will build up a high-level IoT system connecting massive data and realize more innovation application. In the future, the combination of 5G technology and Fintech will bolster Goldpac's R&D power and innovation application in the field of security payment, and create more potential opportunities in the intelligent area.

2. Platform segment will be the biggest growth driver (27% of company revenue and 42% of GP). Platform services includes 1) data services – this will grow as higher end card portion goes up. Inserting Personal data into the pmt card / system. Based on the software so always over 40% GPM 2) Smart devices – Banks, govt organizations are improving efficiency and want to reduce branches so adopting more smart devices. These devices are similar with ATM. In the branches, the banks will put more smart devices – design is similar with ATM and it is combined with smart financial functions. Called super branches. One device will combined with cash / credit card issuance / online services and this system will replace human branch. GP Margin level is 35~40%. These margin level in this segment is higher than the credit card biz.

3. Credit card biz to stabilize as the company focuses more on the high end credit card space. It has had some ASP pressure due to more competition from the followers.

I think the current price is too cheap and market not currently reacting to the big news that China Mobile will cooperate with Goldpac on the 5G front! Expect 70% upside from here!