Stargroup Limited (ASX:STL), an integrated banking technology business, is one company providing this rare mix and has just recorded its 11th straight record quarter of revenue growth.
Stargroup is the only ASX-listed company deploying ATM machines in Australia and operates three separate divisions: an ATM wholesaling business, an ATM operation enterprise, and an EFTPOS and paywave processing business.
The company’s wholesale ATM operations own over 350 ATMs across Australia, which charge a $2.50 debit on use.
Currently, net returns to the company per transaction range from $0.60 to $1.50, equating to approximately $400 net profit per machine, per month.
This figure is set to increase as Stargroup nears completion of an acquisition of Indue Limited, a company which handles ATM processing and settlement services.
This will not only substantially lower costs for each transaction at Stargroup ATMs but will also see Stargroup provide processing services to 70 ATM deployers, managing approximately 12 million transactions per year.
The acquisition is poised to lift Stargroup’s gross revenue by $4 million per year and EBITDA by $1.7million.
The value of ATM withdrawals in Australia in 2015 was over $140.8 billion, so capturing even a very small slice of this market is enough to build a sizable company, Todd Zani, Stargroup and executive chairman said.
“Our very strong growth in this multi-billion dollar industry gives me a lot of confidence that we are on the right track to becoming Australia’s next major ATM independent
service operator,” he added.
In addition to Stargroup’s 11 quarters of record revenue, this year the company has posted a dramatic 597% improvement in gross profit, signalling to the market an increasing ability to monetise value from its ATM operations and investments.
Stargroup is the only ASX-listed company having a direct ownership interest in a manufacturer of its ATM technologies, South Korean private company NeoICP.
NeoICP, which Stargroup holds an 11.28% stake, is a major player in the South Korean ATM market. It has also performed Zani said: “We will continue to target groups, net assets growing over $17 million.
Discussing the company’s ongoing strategy such as credit societies and small banks that are unable to sustain physical branches.
These organisations are looking to expand services while also minimising costs, and our ATMs which are capable of both withdrawing and depositing funds not only meet these expectations but also offer a ready-made network of ATMs in high-traffic locations.”
In what has been described as a proof-of-concept, Stargroup has signed a three year, $15 million agreement with regional bank Goldfields Money (ASX:GMY), providing ATMs in communities where major banks have withdrawn ATM support.
Mr Zani believes Stargroup is well positioned for continued growth by targeting organisations with an established need for financial transactions involving physical currency.
The company is also well prepared for increasing adoption of EFTPOS and paywave technology, with an aggressive push into the sector.
Stargroup currently operates a host of EFTPOS payment terminals, generating revenue from processing fees incurred by merchant traders.
In the past 12 months Stargroup has commenced the deployment of EFTPOS facilities via a wholesaling agreement with some of the world’s leading payment processing companies. Most notably the company has signed a five-year distribution agreement with West International AB, a listed Swedish venture operating across the globe.
The agreement supplies Stargroup with additional EFTPOS payment terminals, as well as permits the company to be in control of the source code used by these terminals, which significantly enhances Stargroup’s capacity to implement its machines into different industries across Australia and New Zealand.
“We have a stated goal of becoming the single largest independent service operator in the EFTPOS and payment industry, and I believe we are well on track to meet this goal by as early as next year,” Zani said.
“Currently, we are finalising our EFTPOS processing technologies with our contracted partners, who represent over 45,000 separate businesses.
“Additionally, the market is favourable for future expansion. With the revolution in paywave technology Australians are increasingly using EFTPOS instead of cash. In fact, despite having more than 900,000 machines already operating in the country, the industry is still growing by close to 60,000 terminals per annum,” he said.