Goldpac Group (3315.HK) - Corporate Presentation Summary
The management of Goldpac Group came to communicate with our investors on 20 April 2017. Here`re the summary of the presentation and the record of the Q&A session.
The company was established in HK in 1993. Currently there are two R&D centers in China, located in Beijing and Zhuhai. Zhuhai is the company's main operation center which engages in developing hardware and software for the cards, manufacturing the cards and providing data services. Now the company has three data centers located in Zhuhai, Shanghai and Manila Philippines.
The company's business has covered more than 1,000 domestic banks, more than 40 overseas banks, more than 200 government projects, more than 100 transportation projects and more than 50 retail customers. The company is China's first and only supplier which is certified by six of the world-leading credit card organizations. The company was listed in HK at the end of 2013.
While focusing on the core business, the company will also develop innovation business. Innovation business includes the following three aspects.
GCaaS Platform Service: It includes GCaaS Cloud Service and Cloud Lab. In October 2016, the Group's Fintech Cloud platform GCaaS was introduced at the Computing Conference hosted by Alibaba. The bank's original business model was to do financial services at the counters. Now banks want to minimize the costs of counter network and the Cloud Platform can help the banks to change counter services into electronic platform services. Goldpac provides high-security data systems and card issuance system platforms. Through the platforms, the company can help banks reduce costs, improve their ability to acquire clients and increase financial business coverage.
Intelligent Security Equipments: The group has diversified mobile payment wearable products and the products have been put on the market since last year.
System Solutions: System solutions includes intelligent life solutions and instant card issuance solutions.
Accelerating Overseas Expansion
Overseas expansion is an important development strategy of the company. The company's overseas team has been expanding and the company has established the first overseas data center and a wholly-owned subsidiary in Singapore and will strengthen HK's function as the global business headquarter. In the next few years, the company will follow the chip card migration plan and actively develop the market in Southeast Asia.
Benefited from China's "the Belt and Road Initiatives" and international development of UnionPay, the company's overseas business continues to make breakthroughs.
Chip Card Shipments in 1Q2017
Smart card shipments of Goldpac amounted to 44.13 million in 1Q2017 (41.47 million in 1Q2016), representing a YoY increase of approximately 6%. The credit card business made a breakthrough. The Group's credit card shipments in 1Q2017 increased over 50% YoY while the share of credit cards for the Group also increased markedly.
How is the changes in the market share over the last two or three years? In 2016 the market share was slightly ahead of the competitors, what is the advantage of the company?
China began to issue chip cards at the end of 2012. The company's market share of chip cards was about 14% in 2013 and 2014. In 2016 the market share increased by 0.5 percentage points to 15.1% compared with 2015. The competition is fierce in the industry, but the top six companies control 60-70% of the market share and the market concentration is high. The cost for banks to change providers is high. Despite of the fierce competition in the industry, the company is still possible to further increase the market share. The company has advantages in credit card and data services businesses. The company's shipments of credit card products accounted for 38% in 2016, indicating that the company's product structure is better than others. The credit card business is expected to develop better, and the company has more advantages to gain market share. VISA, Master Card and other international card organizations are going to enter China market and issue credit card products, and the company has advantages because it has accumulated lots of experiences by issuing domestic and international products.
Is the company's innovative products monetized? Which business is monetized first? How is the contribution to income?
Cloud service is in pilot scheme with one or two domestic banks, but it hasn`t achieved revenue yet, but the cloud lab has achieved revenue in 2016. As for mobile payment wearable equipments, the company's order size has exceeded 10 million in 2016. System solutions business accounted for 7-8% of total revenue. It's one of the Group's business objectives to gradually enhance the revenue ratio of services and solutions business.
What is the relationship between the company and the second largest shareholder Gemalto (International Chip Card Company)? Is there any contradiction in terms of equity interest?
The company and its second largest shareholder Gemalto are important strategic partners. We form powerful combination in the business level and increase the bargaining power and market ability. Gemalto attaches importance to the company's growth in China market and overseas development. In overseas markets, although the two companies have some competition, we have different market advantages. Goldpac has more advantages in the international development of UnionPay products and in Southeast Asia market. Because of the needs of risk management, the world's banks are trying to avoid centralized procurement, so the company has great development and cooperation opportunities in overseas markets.
The company recently acquired the land use right in Zhuhai for building a financial data center. Can you describe more about it?
The company may focus on new business sectors, such as financial technology and financial data services. The company is still making the plan and will have a clearer plan in the future.
The company has bought a property in HK recently, how much is the rent savings and rental income?
The rate of return on property rental is higher than the bank's interest yield.
The company has sufficient cash and hasn`t used much cash for acquisition in the past few years. Are there any acquisition plans now?
The company is always looking into projects. The management is cautious and solid. After a series of adjustments, the capital market is now becoming rational, and now there`re opportunities. The company is actively looking for and contacting domestic and overseas targets. Goldpac will consider overseas development and business diversification in the future. This year the company will increase investment and accelerate investment and acquisition. The company will consider the integration of industrial chain, IoT security certification, financial technology and so on.
Is the product price determination guided by the government?
Price is determined by the product demand and the quantity of a single purchase. Credit card prices are often slightly higher than debit cards because credit card issuance needs customized services. The government will not directly intervene in the procurement of banks, but the CBRC will supervise banks` purchases. The industry is less likely to have vicious price wars under the regulation.
Will the bank force the prices down?
Bank card products account for a small percentage of banks` costs. Banks may prefer to reduce costs in other areas such as reducing the counter network costs.
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