Last week, The Mint Corporation (OTCQB:MITJF) (MIT.V) announced that through its 51%-owned subsidiary Mint Gateway for Electronic Payment Services LLC, it has entered into an agreement for the processing of Mastercard branded payroll cards in an African based payroll card program. The program has a planned initial deployment of 300,000 cards to disburse salaries to government employees which is expected to be complete within 12 months.
Without too many more details behind this three year deal, an investor like myself can try to make some reasonable assumptions over how lucrative it can be. Assuming a $10 ARPU for similar services that Mint currently provides in the UAE, this contract would result in $3 million in revenue per year for the MGEPS entity, or about $1.5M in annual revenue for MIT. But it has much more potential as a foot-in-the-door to the African market with a high-margin, turnkey solution. This is what Mint's CEO Vishy Karamadam had to say about the deal:
This is an important evolution for Mint and showcases our global platform capabilities and the multiple revenue engines residing within Mint’s platform. Mint has built a globally certified payments platform and is a third-party processor certified with Mastercard and UnionPay. The mobile enabled technology payments platform encompasses issuing, processing & acquiring. Mint is among a select group of companies with this capability globally and in the region. We are looking forward to the opportunity to implement and expand our service offerings into rapidly growing economies in Africa. We have a robust and proven model in place in UAE and this expansion further validates our theme of global expansion and focusing on the underbanked.
As Mint has a globally certified payments platform and is a third-party processor certified with Mastercard and UnionPay, it makes the company a very valuable partner to those companies which have the clients and front-end infrastructure but lack the back-end technology and relationships that Mint has developed over the years from its business development activities in the UAE. It also allows for a turnkey solution where the company can deploy its technology stack to different jurisdictions with minimal upfront capital cost. As the partners would be responsible for client-facing interactions, margins are high and the cost of acquiring a client for any potential expansion of financial service offerings is low.
While I assume that $10 is the annual ARPU floor for this deal, at some point in time Mint would likely offer a full suite of financial services as it is in the process of doing in the UAE. This deal is with government employees, people who are in a much different situation that the blue collar migrant workers who are benefiting from Mint's services in the UAE. For instance, I expect the lucrative low-hanging fruit of remittance service to not apply here. Lending, mobile top-up and monthly bill payment services would more likely be the source of additional revenue.
I look forward to the company providing more commentary around this deal and future deals in Africa so we can get a better idea of how lucrative they truly are. Mint management has been very transparent in communicating the revenue drivers and the reasons behind them for the business in the UAE and how the company plans to achieve a $130 ARPU in the country. I expect Mint to do the same for this and any future endeavors in Africa in due time. Until then, I am happy to speculate on this viability of this business and accumulate shares at what I deem to be a good deal while we are in a depressed Canadian small cap market.
At $0.19, MIT has a market cap of $33 million and an enterprise value of around $55 million. With 700,000 clients under a 51% owned subsidiary, this translates to a $154 per cardholder valuation. Mint has a clearly defined path to a $130 ARPU in the UAE which should show signs of execution within the next three or four quarters. The path to an ARPU beyond $10 in Africa is not yet obvious, though alongside the growth of the business in the UAE, I expect Mint to eventually disclose those details.
Disclosure: I am/we are long MITJF.
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