Boasts Dominant Market Position
The author is an analyst of NH Investment & Securities. She can be reached at michelle.cho@nhqv.com. -- Ed.
As a comprehensive electronic payment player offering easy cash payment and virtual account/firm banking services, Settlebank boasts a dominant position in the fintech arena. Accordingly, the company looks well-positioned to benefit from the ongoing shift from offline to online payments.
Maintain Buy rating; raise TP to W39,000
Adhering to a Buy rating, we raise our TP on Settlebank to W39,000, a level offering 18% upside. Noting rising demand for easy payment platforms such as Kakao Pay in line with accelerating contactless consumption trends, we view Settlebank, a company boastinga dominant position in the easy cash payment arena, as possessing robust growth potential. In calculating our TP, we applied a target P/E multiple of 15x, which was derived based on fair value (calculated by applying a 20% (CAGR for sales over 2020~2022) premium to current P/S). Investment risks include: 1) tepid consumption due to prolonged economic slowdown; 2) vertical integration efforts at large-sized e-commerce platform players; and 3) downward pressure on commissions.
Boasts dominant market position
Settlebank boasts a dominant position in the easy cash payment and virtual account service arenas. Given such, we positively view the ongoing increase in the portion of easy payment services out of total online payment volume. The PG business is also sustaining robust growth, thanks to expanding contactlessconsumption trends. Moving ahead, the firm plans to widen its business portfolio to greater include mobile payment solutions. In addition, we expect the company to expand its M/S in the regional currency market, backed by recently launched app 010 Zero Pay (offers local gift certificates). Also positive, additional contracts with large-sized merchants are anticipated in 2021.
Of note, 2020 DPS has been set at W350, a level slightly lower versus in 2019, owing to losses incurred following negotiations regarding regional currency-related commissions. That said, with the company’s dividend policy (aimed at maintaining DPR of 23~28%) remaining intact, we expect dividend payouts to increase in line with anticipated sales growth moving ahead.