MoneyGram Expands Presence in Serbia

| About: MoneyGram International, (MGI)

Expanding its presence in Serbia, on Monday, MoneyGram International Inc. (NYSE:MGI) announced its partnership with Alpha Bank Srbija A.D. to enhance its money transfer service business by adding more than 165 locations in Serbia. This alliance will double the existing locations in Serbia that the company initiated in 2008.

The money transfer business remains the driving force for MoneyGram, and going forward management projects a strong remittance market in Serbia. Hence, the company is in the process of evolving advanced ways of consolidating in the region. Through the alliance with Alpha Bank, MoneyGram will be able to support its regional strategy of constant improvement of money transfer services for its clients, also adding elements of resonance, convenience, affordability and reliance.

In 2008, Serbians received an estimated $5.5 billion in remittances according to the World Bank, primarily from Germany, Austria, Switzerland and the US. Hence, MoneyGram is focusing on providing the greatest value for global money transfer services in Serbia through highly convenient locations.

However, the global financial crisis has dampened the growth structure across the money transfer service industry, and MoneyGram did not escape unscathed. The company’s operating earnings have been marred by several one-time charges and fixed overheads. Moreover, weak demand growth in highly exposed markets such as Mexico and Spain adversely affects the average fees for money transfer services.

Nevertheless, MoneyGram continues to realign its investment portfolio, expand its market exposure globally and restructure its operations from time to time to adapt to the crisis period. Yet the company has several issues such as its cost-cutting initiatives, debt-repayment strategy, the utilization plans for cash and its equivalents and for generating sufficient cash flow for its operations to deal with in the near term. Unless these concerns are addressed, the company may continue to generate loss in its business. Hence, we recommend a Neutral stance on the stock.