Sky-high valuations, rising inflation, monetary tightening and concerns over slowing economic growth have all resulted in a massive sell-off in technology stocks this year. EM fintech companies are down 21% ytd, but there are some companies that still managed to deliver strong returns to shareholders due to their robust operating performance and investors’ confidence in the business model. We highlight five such names in this note – these stocks have generated a median 35% ytd return and are operating across different markets and sectors.
Angel One (India, investech)
ytd performance: +56%. market cap: US$2.0bn
Angel One, previously known as Angel Broking, is a digital investment services company offering its customers stock trading, advisory services, margin funding and mutual fund investments. It is one of the largest retail brokerage houses in India.
The company was incorporated in 1996 but shifted to a fully digital business model in 2019. Angel One has various innovative product offerings, which include ARQ (a robo-advisory platform), iTrade Prime (a trading platform offering flat per-order pricing for various asset classes) and AngelBee (a mutual fund investment platform). It currently has a total client base of 9.3mn, with 3.7mn active clients.
Angel One's positive share price performance is supported by the firm's strong growth momentum. The company's average daily turnover during Q1 2022 rose 130% yoy to cUS$115bn, with a market share of 21%. Its revenues in this period rose 63% yoy while profits are up c100% yoy.
Angel One's transformation from traditional brokerage to a fully-digital model
Source: Company presentation
Cielo (Brazil, payments)
ytd performance: +51%. market cap: US$2.0bn
Cielo is Brazil’s leading payments infrastructure company with more than 1.2mn active merchants using its services. The company offers POS devices to merchants to accept credit and debit card payments. In addition, Cielo also provides a suite of products for e-commerce merchants including checkout services on merchants’ websites as well as solutions for those who want to sell through platforms like WhatsApp.
The company processes over US$45bn of transaction value through its products each year. Cielo also has various subsidiaries, but the largest of them is Cateno, which is jointly owned by Banco do Brasil. Cateno manages card payments transactions including account management and security solutions. It is also focusing strongly on innovating new technologies in the payments sector.
During 2021, the company saw a major increase in its profits, which rose 98% yoy to US$210mn. This was mainly on the back of a 20% decline in operating expenses, while revenue growth was just 5%. Payments volume rose 9% during the year to US$45bn. In addition to strong profit growth, the share price of the company has also been supported by: i) the sale of its stake in US firm Merchant e-Solutions for cUS$175mn; and ii) a share buyback plan that the company approved earlier this month.
MCash Integrasi (Indonesia, payments/diversified digital products)
ytd performance: +36%. market cap: US$781mn
Established in 2010, M Cash Integrasi is a digital services provider operating across various business segments with a broad and growing suite of products (currently 18, see exhibit below). M Cash identifies itself as a platform that builds digital products and services to address specific unmet economic needs. Its flagship product is Digital Kiosk, which is targeted at providing services to unbanked customers. Since 2017, the company has expanded into various other product lines, including mobile wallets, payments infrastructure, business communication, cloud advertising, logistics and food delivery.
M Cash's strong share price performance this year is likely down to its rapidly expanding product portfolio. It aims to capitalise on network effects and data gathered through its wide product suite to enhance the consumer experience and boost customer retention.
M Cash's expanded product portfolio
Source: Company presentation
Pax Global Technology (China, payments)
ytd performance: +16%. market cap: US$883mn
Pax Global Technology is a payments infrastructure company headquartered in China. The company is a leading provider of electronic payment terminal hardware and transactional software services to various companies across the globe. In the past decade, the company has turned into a global provider of payments infrastructure products as >90% of its sales now come from international clients, this is compared to only c20% in 2010.
The company has more than 4mn terminals connected to its platform. Pax is seeing strong demand for its Android smart terminals, sales of which were up 78% yoy in 2021. The revenues of the company grew 27% in 2021 and its profits were up 21%.
The company’s US subsidiary was raided by a US federal investigation in October 2021 (for reasons unknown) which took a toll on the share price. This is also one of the reasons behind the strong performance of the stock so far this year, as the shares are recovering in the absence of any material updates on that matter. Nevertheless, the shares are still down c30% from their October levels.
Pax Global geographical presence and growth
Source: Company presentation
Intellect Design Arena (India, diversified digital products)
ytd performance: +9%. market cap: US$1.5bn
Intellect Design Arena (Intellect) is a leading technology solutions provider for banking, insurance and other financial services companies. The company serves over 260 global clients in over 90 countries. The company has solutions for various financial products such as digital lending, cards and digital payments. Roughly 60% of Intellect’s revenue comes from recurring licence-linked revenues (including licences, SaaS and annual maintenance contracts). The company owns various platforms including iKredit360 (lending) and Xponent (data analytics).
During the nine-month period to the end of December 2021, the company earned revenue of cUS$125mn, up 17% yoy, with SaaS and subscription revenues up 122%. We think the share price performance and resilience in the face of the global tech sell-off is because of the company’s growing revenues, particularly from the SaaS segment, along with its high-profile and geographically diversified client base.
Intellect product mix
Source: Company presentation