Mi-Pay moving the right way

Mi-Pay (AIM: MPAY) has announced results which show reduced losses and evidence that things are moving in the right direction. The company provides payment services for mobiles; so it’s certainly exposed to a growing markets. Costs and cash outflows have been reduced, while the value of customer transactions grew by 31 per cent in 2015.

 Mi-Pay moving the right way


Mi-Pay (AIM: MPAY) has announced results which show reduced losses and evidence that things are moving in the right direction. The company provides payment services for mobiles; so it’s certainly exposed to a growing markets. Costs and cash outflows have been reduced, while the value of customer transactions grew by 31 per cent in 2015.

Mi-Pay (AIM: MPAY) has announced results which show reduced losses and evidence that things are moving in the right direction. The company provides payment services for mobiles; so it’s certainly exposed to a growing markets. Costs and cash outflows have been reduced, while the value of customer transactions grew by 31 per cent in 2015.

 

The company provides mobile phone operators with an outsourced payment services platform for use by pay-as-you-go customers. Even in a mature market like the UK, 70 per cent of these pre-pay mobile users top-up their airtime and data allowances by buying a voucher and entering the code numbers into their phones. This is cumbersome for the user and it’s also a more costly way of collecting payments for the operator. So we should see a trend towards using the sort of online method Mi-Pay provides.

 

Mi-Pay’s online service brings further benefits to operators. It is a much more effective way of detecting fraud, and operational improvements here contributed to a rise in gross margins fo Mi-Pay. It also provides the network operator with more information about the customer, making marketing and customer retention initiatives more effective.

 

Europe is the main focus with the likes of O2 and Vodafone on board, along with ‘virtual operators’ like the Post Office. There’s also a contract in the Philippines which has potential given the 20 million pre-pay customers using that network.    

 

Volume growth and operating efficiencies have reduced the rate of cash burn to £30,000 per month. If trends continue the company should start generating cash during this year, which is a key short term objective. Broker Zeus Capital sees revenues growing from the £3m just reported to £5.8 million in 2017 which would result in earnings of 1.2p. That’s not quite enough to make them a buy at the moment; but there’s plenty of operational gearing should sales grow at a faster rate.     

 

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