BLS

Ever since a sharp plunge on its first trading day and the day it surged past the IPO level, Sabuy Technology Public Company Limited (SET: SABUY) has been on a rise with a gain of more than 830% this year. SABUY dropped 25.20% on the first trading day in Thailand’s market of alternative investment (mai) from the IPO level of Bt2.50 per share to Bt1.87 at the closing on November 11, 2020. After a few bumps and bruises for a few months, SABUY finally stood firmly above its IPO level in late February 2021 and it has been on a rise since then. The company also reported consistent growth of its net profit with 58 million baht in 2019, 102 million baht in 2020 and 136 million baht for the first nine-month period of 2021. As of 10:22 local time in Thailand on November 25, 2021, the share price of SABUY rose ฿2.10/share or 13.91% to ฿17.20/share with a trading value of 1,136 million baht. Bualuang Securities (BLS) wrote in its analysis, upgrading SABUY’s 2022 earnings forecast by 55% to 466 million baht, representing an increase by 140% YoY along with a new target price at Bt23.00 per share, up from Bt16, pegged to PEG 1x, assuming a 2021-23 EPS CAGR of 67%. BLS stated that the 2022 profit growth estimated by the research team can be achieved with three drivers which will propagate top and bottom-line expansion. ATM/CDM services On Nov 8, SABUY announced that it would acquire 50% of Platt Finserve Co Ltd (PFS), a service provider for 10,000 ATMs/CDMs offering counter services at 7-Eleven branches. PFS’s contract runs 10 years. Other ATMs will be moved out from these branches. And some counter services will migrate to CDMs (such as bank cash deposits). It’s a win-win deal, as banks don’t want to shoulder the costs of both ATMs and branches. There are 50k ATMs nationwide. PFS will generate income from installation and transaction fees tied to CDM services. SABUY expects PFS to realize earnings of Bt300-500m/year for 2022 (we model for a 2022 PFS profit of only Bt300m). Furthermore, PFS plans to expand its CDM coverage to other big retailers. Partnering with FSMART Also on Nov 8, SABUY announced a JV with FORTH (its main rival has become a partner). The new JV will use the sales & marketing channels of both firms to promote each other's businesses, including cooperation over cost management and pricing alignment. Once they raise prices for some services, the incremental revenue will go straight to their respective bottom-lines. Moreover, SABUY will acquire 4,644 vending machines from FORTH. Added to its current 5,600 vending machines, it will have more than 10k units, making it a leading player. In that industry niche, scale is central to success. We expect its vending machine biz to turn around from a Bt50m loss for 2021 to a profit of Bt50-60m for 2022. Moving into fintech SABUY launched a lending business for users in its ecosystem. The first product is Convert Kiosk to Capital, which provides loans for top-up kiosk owners using online top-up machines as collateral. We assume outstanding loan value of Bt500m by YE22 and a net margin of 10% (management’s targets are Bt1bn and a NM of 12-15%). Furthermore, the firm should generate revenue from sales of insurance products. BLS stated that the aforementioned three growth drivers should add Bt370-500m to SABUY’s top-line. Even assuming flat income from existing businesses (despite easing COVID-19 effects), its net profit could rise from Bt194m for 2021 to Bt564m-694m for 2022 (up by 191-258% YoY), implying a 2022 PER of 30-35x and a PEG ratio of 0.14-0.24x. BLS’ 2022 forecast is conservatively Bt466m, up 140% YoY. As SABUY’s ecosystem grows, it can collect data. The data will help it develop the ecosystem and the businesses of its partners, enabling further upside to earnings.