MOL Global IPO proceeds to be partly used to repay MDV loan
By Goh Thean Eu July 16, 2014
- IPO proceeds will be used to repay debts, among other uses
- No plans to pay dividends in the foreseeable future
MOL Global Inc, the largest largest alternative e-payment facilitator for online digital goods and services in South-East Asia by payment volume according to Frost & Sullivan, will use a portion of its initial public offering (IPO) proceeds to cut down on its borrowings, including the money it owes to Malaysia Debt Venture Bhd (MDV).
MOL Global is preparing for a listing on the Nasdaq Global Market in September. According to its preliminary prospectus, it may raise up to US$300 million in the listing exercise. The final amount of the IPO has yet to be determined as at press time.
From the amount, approximately US$30 million will be used to repay debts. These debts comprise the RM29.3 million it owes MOL Global Singapore in the form of interest-free advances when it acquired Game Sultan, PaytoGo, NganLuong, Rixty, Uniwiz and Zest.
It also plans to settle part of RM68 million in revolving credit facility it received from MDV. The company, however, did not disclose how much it plans to reduce its MDV debt by. MDV is an arm of the Malaysian Government that plays the role of a debt financier for companies in strategic industries. [RM1 = US$0.31]
From the listing proceeds, about US$25 million will be used to increase its beneficial ownership in its subsidiaries – namely MOL Thailand, Game Sultan, PaytoGo and MyCNX, the company said.
“The balance [will be used] for general corporate purposes, including funding potential acquisition of complementary businesses and funding our ongoing working capital requirements,” MOL Global said in its preliminary prospectus.
A bulk of its proceeds may be used to expand to new markets as well as to accelerate growth in its existing markets, including Indonesia, Thailand, Brazil, Turkey, the United States, New Zealand, Australia and Vietnam.
MOL Global, majority-owned by Malaysian billionaire Vincent Tan (pic), operates a payments platform that facilitates online and mobile commerce for consumers. Its primary product is its MOLPoints micropayment system, which sells payment credits that can be used by consumers to purchase online game credits and other digital content, such as Facebook Game Cards.
It also operates MOLReloads, a distribution network that distributes prepaid mobile airtime and digital content; MOLPay, a payment solution for online merchants; and MMOG.asia, an online games portal.
It plans to launch MOLWallet, an online and mobile payment processing and money transfer system, in Malaysia sometime this year.
Based on the information available in the preliminary prospectus, Tan currently has a 69.3% stake in MOL Global, Sultan Ibrahim of Johor has a 14.7% stake and Ganesh Kumar Bangah, the group chief executive officer and the founder of MOL Global, has an 11.3% stake.
The document did not state how much these major shareholders' stakes will be diluted post-IPO.
The underwriters for the IPO are Citigroup, Credit Suisse and Deutsche Bank Securities.
Strong potential in emerging economies
E-payment service providers are seeing strong growth because of a few factors, such as increasing Internet penetration and digital content, as well as the growth in the e-commerce and online gaming industry.
In a Frost & Sullivan research report contained in MOL Global's preliminary prospectus, the research and analyst firm said it will not be surprising if MOL Global decides to accelerate its business in Brazil and Indonesia.
These two countries, which have household Internet penetration rates of 52.7% and 20.3% respectively in 2013, are expected to see Internet penetration rates reach approximately 70% by 2018. The Philippines and Thailand, which are also key markets for MOL Global, are expected to see Internet penetration rates hit 69.4% and 73% respectively by 2018, from under 40% in 2013.
Smartphone penetration in these key markets is also expected to grow. Frost & Sullivan said that Brazil, Indonesia, the Philippines, Thailand and Vietnam are expected to see smartphone penetration reach as high as 74.2% by 2018, from as low as 14.5% in 2013.
In terms of e-commerce revenues, Indonesia is expected to experience the highest growth amongst its key markets – from US$1 billion in 2013 to US$14.7 billion in 2018, representing a compounded annual growth rate (CAGR) of 71.2% (click chart below to enlarge).
Brazil, whose e-commerce market size is over US$18 billion in 2013, is expected to hit US$34.5 billion by end-2018.
No dividends for the near-term
As MOL Global is still in the growth phase of its business, the company said that it has no plans to pay dividends to its shareholders in the near-term.
“We do not have any present plan to pay any cash dividends on our ordinary shares in the foressable future after this offering,” MOL Global said in its preliminary prospectus.
MOL Global registered a 79% growth in revenue in 2013 to RM171.5 million, while net profit more than tripled to RM18.7 million compared with RM6 million in 2012.
On the surface level, it appears that MOL Global is poised for another growth year this year. The company posted RM48.6 million in revenue for the first quarter ended March 31. Should it maintain its revenue performance in the remaining three quarters, its full-year revenue could be more than RM190 million.
As at end 2013, the company has more than 4.44 million registered users, including 1.45 million registered users in Malaysia and 1.38 million in the rest of South-East Asia. It also has 526,121 registered users in Turkey.
The number of registered users has continued to grow. For the first quarter ended March 31, registered members grew 11% to 4.94 million, of whom 997,091 are active registered paying users.
MOL Global also processed over 20.84 million transactions last year, and more than 4.98 million transactions in the first quarter 2014 alone.