Leading Fintech Service Provider
The authors are analysts of NH Investment & Securities. They can be reached at hyundong.lee@nhqv.com and jangjaeho@nhqv.com, respectively. — Ed.
Mainly offering fintech platform-based corporate finance solutions, Webcash has been enjoying healthy earnings growth over the recent years. Of note, the firm provides different fintech services to public institutions and companies in accordance with their size. Recent amendments to Korea’s three major data privacy laws should give a boost to its open API platform business.
Offers fintech platform-based corporate finance solutions
The focus of corporate finance solutions have been shifting from Internet banking to fintech platforms. This shift has been positive for earnings at Webcash, which offers fintech platform-based services that feed financial information into ERP systems, and owns related IP rights.
The firm’s main fintech services are: 1) ‘In-House Bank’ for public institutions; 2) ‘Branch’ for large corporations; 3) ‘sERP’ for SMEs; and 4) ‘Kyungrinara’ for SMEs. We note that global ERP player SAP has recently adopted In-House Bank as its default banking solution for SAP 4.0—this development should lead Webcash to enjoy the addition of 80 new clients pa. Having attracted 3,300 new clients in 1Q20, Kyungrinara is also performing well.
Under Webcash’s current business model, sales for its fintech services mainly come from service subscription fees (rather than installation fees, which are charged only once upon initial software installation). In line with its shift towards a subscription-fee based business model, Webcash’s sales are likely to rise to W57.3bn (+21.2% y-y). Trading at a 2020E P/E of 36.3x, its shares are expected to go through re-rating, as the firm’s earnings have been improving in line with ongoing fintech industry expansion.
Open API platform business to shine
Also positive, the amendments to the three major data privacy laws are likely to give a boost to Webcash’s open application programming interface (API) platform business. We note that Webcash established the first open finance API platform in Korea in collaboration with NH Bank. Charging fees based on the number of transactions, the platform offers APIs mainly to financial institutions and fintech companies. Having posted 2019 sales of W1.12bn (+142% y-y), the open API platform business should enjoy further growth on expanding open banking services in Korea. We also note that its affiliate Coocon possesses around 50,000 APIs. Given such, we foresee a strong IPO valuation for the firm.