Company Overview: iSignthis Ltd provides identification and payment authentication services. The Company is engaged in anti-money laundering (AML)/counter terrorist funding (CTF) know your customer (KYC) identity proofing. It provides online payment security, Internet identity, e-mandates and e-contract validation services to e-Commerce operators, and assists AML and CTF. The Company's solutions include Evidence of Identity (EOI), e-Know Your Customer (eKYC) and Strong Customer Authentication (SCA). Its Paydentity solution incorporates real time electronic verification to converge remote payment authentication and KYC identification. Its eKYC offers a range of online services, including digital banking, card issuers, loan providers, insurance, bitcoin and crypto currency exchange, financial services, and person to person remittance/money service businesses. It also has partnerships with various card schemes and payment processors, as well as direct connect to a number of acquiring institutions.

ISX Details

iSignthis Ltd (ASX: ISX) has emerged as a world leading RegTech for identity verification and payment services. It is worth noting that the group has unveiled ability to match-verify about 62% of the world’s population, which is banked via ISX’s Paydentity solution; and iSignthis can remotely verify the identity to enhance the due diligence of the KYC (Know Your Client) requirements. With an increasing European merchant focus, the Company has cross listed on the Frankfurt Stock Exchange (FSE). The Company is now generating revenues in its core streams - KYC verification, Payment processing function and Settlement. The Company’s biggest integration has been with the National Australia Bank and there are few other agreements which are in the pipeline that will generate large volume cashflow. As existing merchant utilisation blanket is growing, rise in transaction volume is expected to benefit ISX.

First European Based Settlement Merchant is live and transacting: Recently, ISX announced that one of the four merchants that were contracted lately as reported during the last week of February 2018, is now live and transacting, and will contribute to revenue going forward. This merchant is accepting payments via ISXPay from Visa, Mastercard and Sofort, with Trustly and JCB services to follow within coming weeks. Gross Processed Turnover Value (GPTV) is anticipated to be more than 50m Euros, which is annualised for this merchant based on the trading histories provided by the merchant. The company will provide a more accurate estimate of the integration timetable for the remaining three merchants once schedules are agreed with each of the parties. Moreover, the partnership with Worldline for payment services to EU based customers was made live in January 2018.
 

Recurring Transaction Volumes (Source: Company Reports)
 
Contract with Worldline to be a success: The Company announced that its subsidiary Company iSignthis eMoney Ltd completed technical integration with Worldline and allowed the parties to commence their partnership. European eCommerce merchants, including FinTech firms and qualified cryptocurrency exchanges will now have access to an exciting new service that will combine the RegTech capabilities of iSignthis, with the acquiring capabilities and expertise of Worldline which will be contracted and delivered via ISXPay. iSignthis eMoney Ltd will be operating under its own eMoney Monetary Financial Institution license to directly contract European merchants.

Decent Financial Position: Revenues for 1HFY18 were significant and were driven by stronger than expected usage of the platform from existing customers while activation for new customers commenced in December quarter. Settlement of the processing for customers commenced in the second half and growth in Gross Processed Turnover Value (GTPV) exceeded management expectations. Total audited revenue for 1HFY18 was A$827k, whereas for 1HFY17, it was A$308k. ISX also successfully completed a share placement of the institutional investors and raised $6.5m at $0.19 per share. The net assets increased by $3,943,911 and amounted to $9,354,275 as on 31 December 2017, while the same stood at $5,410,364 as at 30 June 2017. The loss for six months period ending on 31 December 2017 for the consolidated entity after providing for income tax narrowed by 22.3% to $2,606,234 from $3,355,811 reported during the same period in the prior year.
 

Assets and Liabilities (Source: Company Reports)
 
Operational Trading Outlook: The company’s guidance for the revenue growth for the March quarter 2018 is at least 50% higher than the December quarter (previously at least 30%) and is based on actual transactions till February 23, 2018.  Settlement revenues now contribute to 65% of the total revenue by vertical and will continue to be a primary driver of revenues. The Company updated the annualised GTPV book value and this is in excess of $400m against the previously reported $100m. Quarterly settlement of the revenue growth in the March quarter exceeded the overall revenue growth rates but Tx volumes from one merchant were adversely affected due to volatility in the cryptocurrencies market.

Grant of EMI License: Company’s subsidiary iSignthis eMoney Ltd trading as ISXPay has been granted eMoney Institution (EMI) License #115.1.317 by the Central Bank of Cyprus (CBC). This allowed the Company to operate as a full transactional, deposit taking eMoney Financial Institution (MFI) in the European Economic Area (EEA). The eMoney MFI license requires the Company to report to the CBC monthly and also provide specific reports on a half yearly and annual basis. This annual reporting includes audited accounts and is based on the standard European Timetable and the Company will soon apply for changes in its reporting date to 31 December as opposed to 30 June, effective for 2018 calendar year.

Integration with other services: Poli Payments, which provides consumers with an alternative payment method to make an instant payment to merchants instead of using cards, has been integrated with the ISXPay and Paydentity platforms. As a value-added service, the Company has incorporated its own unique Paydentity service to Poli Payments for high risk industries including AML (anti-money laundering) regulated sectors like gaming and gambling. The Company also completed its integration with cryptocurrency payment processor, Buy Coin Now, to enable the consumers buy Bitcoin using credit cards, bank transfers and dotpay. The integration of services with Dialinvest International N.V. (gaming portfolio) has commenced and the Company will provide Dialinvest with its full range of Paydentity services including Digital KYC, Strong Customer Authentication, Fraud Prevention, Payment Gateway and Card Tokenisation.
 

Payment Scenario through Integration (Source: Company Reports)
 
Setting strong merchants’ base: The Company is now exploring other eMoney services which it may offer to the market under license conditions that have been granted to it by EEA Monetary Financial Institution authorisation. Pipeline of new merchants seems to be decent and the Company aims to update the market about this on a timely basis. iSignthis will also move to contract its pipeline of prospective EEA merchants and will seek to bring them onboard as quickly as possible. The Company continues to build a strong platform of regulated merchants and soon will be a regulated cryptocurrency exchange and wallet, enabling the merchants to meet the vast and complex compliance requirements of the 4^th AML Directive and upcoming 5^th Directive.
 

Illustrative Contracted Merchants (Source: Company Reports)
 
Stock Performance: Company’s EPS for half year ending on December 2017 was (0.41) cent against (0.54) cent for December 2016. ROE in 2016 was (139.8%) that improved to (75.2%) in 2017. There was also an increase in Asset Equity ratio from 1.07 in 2016 to 1.14 in 2017.  The stock prices have been up by 19.35% in the past six months but declined by 2.63% in the last five days at the back of volatile environment. Meanwhile, the Company’s integration of payment gateways and further contracts have expanded its merchant acceptance network. By looking at the overall scenario and this small-cap company emerging as an exciting IT player with good growth trajectory, supported by rise in revenue guidance, key SaaS based products, and boost from the KYC identity proofing trends; we give a “Speculative Buy” recommendation on the stock at the current market price of $0.18
 

ISX Daily Chart (Source: Thomson Reuters)
 

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