Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Isignthis (ISX) is an Australian technology company that deals with online payments and user identity. ISX, through its patented Paydentity, Know Your Customer’s Customer (KYCC) platform, links a person’s identity to an electronic payment. Paydentity creates the identification link within 3-5 minutes. In turn, Paydentity unlocks your identity in a way that satisfies the Anti-Money Laundering (AML) and Countering the Financing of terrorism (CFT) regulation.
Are you confused yet? Let’s go through an example.
Step 1: Customer makes online payment
- Say you buy a $100 forex trading book online using debit/credit card and is processed by iSignthis
Step 2: Customer receives secret
- The online payment is randomly divided into two amounts creating a “dynamic secret”
- g $64.12 and $35.88
Step 3: Customer retrieves secret
- The customer logins into online banking and retrieves the dynamic secret
Step 4: Customer confirms the secret
- The customer enters a one-time password and supporting documents
Step5: Digital KYC complete
- The customer provides ownership of the account
Why did ISX rise by an astonishing 870% over the past year?
- September 10th, 2018 = $0.17
- September 10th, 2019 = $1.65
Key stock price-sensitive event one: ISX entered agreements with major Australian card schemes – 6th February 2019
ISX announced the establishment of direct licensing agreements between ISXPay and Mastercard, American Express, China Union Pay, and Diners. ISXPay allows customers, under the card schemes, to be processed through online payments. These agreements allow ISX to increase its global market potential. In turn, investors saw the agreements as a sign of revenue growth. Thus, the confidence behind ISX begun.
Key Stock sensitive event two: iSignthis acquires Baltic Banking Service (BBS) 15th February
BBS is a Lithuanian company that develops banking software to allow rapid connectivity between networks. Not only does BBS expand ISX’s engineering experience but provides a gateway to a larger customer base. Because BBS is already servicing 16 Central Bank of Lithuania’s institutional, ISX’s acquisition does increase its customer base. Consequently, investors saw the acquisition as a pathway to more efficient software and revenue growth as ISX taps into the Lithuanian and European markets.
Key Stock sensitive event three: Windsor brokers join the ISXPay train – 25th February
Windsor Brokers, one of Europe’s most established forex brokers for the past 30 years, went live on ISX Pay. Windsor brokers allowed ISX to gain and verify 1.5million customers. The decision by Windsor brokers instantly demonstrated to investors the confidence in ISX. Also, bolstering ISX’s worldwide portfolio of merchant banks.
Key stock event four: ISXPay Australian card processing facilitation agreements – Paydentity applications results in 150 new accounts – 16th June
iSignthis announced the approval of 150 new merchants. The efficacy of the Paydentity service attracted these new merchants to engage in ISX. Primarily because businesses utilise Paydentity technology to meet their Anti-Money laundering and Customer Due diligence regulators. In turn, investors saw the potential for Paydentity to become an integral part of the compliance procedures in Anti-Money Laundering. Therefore, increasing ISX’s customer base and forecasted revenue in the global market
Key Stock event five: Visa Incorporated Agreement – 8th August
ISX announced the establishment of an Australian Principal member licensing agreement with Asia pacific Singapore subsidiary of Visa. The deal allows ISX to charge a percentage fee on the sales made by customers under Visa. Investors instantly saw the revenue opportunity in this agreement. Especially because Visa has more than 3.3 billion cards worldwide across 200 countries.
After reading these stock events and the recent surge in share price, you might have a favorable perception of ISX’s potential growth. However, here at YIG, we provide investors with the red pill financial analysis, allowing you to make to the most educated decision on the hot stocks. Let us examine the financial negatives.
Firstly, ISX is unprofitable. Unprofitable companies instantly send alarm bells inside the smart investor. Why? Without a profit, the return on equity ratio is usually financially poor and the viability of the business is questioned.
Moreover, ISX’s revenue has only increased by 35% (June 2018-2019). The relatively small revenue growth indicates a long road ahead for ISX. In which strong revenues resulting in higher profit margins will not be a reality for a while.
Furthermore, operating expenses continue to climb causing ISX to report a negative cash flow of -$5.71 million (30th June 2019).
Where to from now for investors?
Investors can often pick a side, buy or don’t buy. ISX’s astonishing share growth, global expansion of merchants (Forex brokers, cardholder schemes and central banks) and the recent announcement of 1.1 billion Gross processing turnover volume (GPTV) indicate a possible buy*. Moreover, the European Patent Office intends to grant a patent for ISX payment technology in 38 countries. Especially with the current share price. However, the recent controversy from governance firm Ownership Matters, around ISX’s revenue reporting, and six-week trading suspension decreased investor confidence and stock price. Confused which side to pick? YIG recommends you sit on the fence until the revenue issue cools down. Individual research is advised as this our opinion based off extensive research.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin, Associate of YIG