Should shareholders approve the resolution in an EGM in September, MC Payment will soon be renamed Oxpay Financial. It is a modestly-sized Catalist-listed company with a market cap of around $100 million. Yet, in May and June this year, the company was the subject of a board tussle for control. What is so valuable about the company?
It could be MC Payment’s four payment licences, and its claim as Singapore’s first payments company to be listed. The four payment licences, include the Payment Services Provider Licence from the Monetary Authority of Singapore (MAS).
“You will not see payment companies in Singapore with so many licences for Singapore, Malaysia, Indonesia and Thailand, and potentially, licensed in Europe, Australia and Cambodia. These licences will expose us to greater international communities in the e-payment business,” says Ching Chiat Kwong, non-executive chairman of MC Payment. Ching is also chairman, CEO and major shareholder of Oxley Holdings.
He adds: “I think with all these licences many businesses will be very comfortable to work with MC Payment.” Ching is speaking to The Edge Singapore via Zoom from a hotel room in Chongqing, China — where he is in quarantine — before heading to Beijing and a project in which Oxley holds a stake in Gaobeidian, located in Hubei province. The site was acquired by Oxley’s partners KSH Holdings in 2016. It is near Xiongan, where President Xi Jinping announced — in 2017 — the creation of China’s latest special economic zone (SEZ).
‘Complementary role’
“My role in MC Payment has always been complementary to the former CEO. When he approached me for the RTO (reverse takeover) I envisaged what I could do for him as a partner. I would try to introduce as many businesses as possible. I have recommended him to a lot of people and companies hoping that MC Payment can collaborate with them,” Ching says. The RTO was completed in February.
However during the process, according to former MC Payment CEO Anthony Koh in statements to shareholders via SGXnet, the RTO company Artivision had to redeem bonds of $10 million. Ching entered into a Settlement Agreement where he acquired these bonds. Upon the completion of the RTO, Artivision became MC Payment, and Ching received $33.8 million worth of shares in MC Payment. The post-consolidation issue price was 52.5 cents. This left Koh with 7% of the company, while Ching owned 28% of MC Payment.
“Previously I had a loan with Artivision and this loan was transferred to MC Payment. I managed to get in a few investors, investing $7 million to $8 million, which was converted into shares so there is no financial distress on MC Payment’s part. After the RTO in February, things didn’t change. I still tried my best to help [Koh],” Ching explains.
He adds: “The RTO didn’t come easy. I had to sign off a personal guarantee should the company be in financial distress. I had to do a placement to make sure MC Payment had enough money to survive.”
MC Payment started trading on Singapore Exchange (SGX) Catalist in February, and SGX accepted his commitment to support the company for the next 12 months.
During MC Payment’s first AGM as a listed company on April 28, Ching’s son Shawn and his representative on MC Payment’s board, Harry Ng, did not garner sufficient votes to be re-elected as directors. Koh has maintained that Shawn Ching and Ng just did not receive the votes needed to continue being directors. Based on letters from shareholders seen by The Edge Singapore however, Koh canvassed shareholders for their blank proxies, and used these proxies to vote against Shawn Ching and Ng.
‘Surprised’
“During the first AGM, I didn’t know much about the election. I left everything to Shawn and Harry. After I got the results I was surprised because they were elected with a majority during the RTO and in two months they were booted out,” Ching says.
In fact, Shawn Ching did not have to stand for election, but took Koh’s place because the latter was not confident of being re-elected.
During a board meeting before the April 28 AGM, Koh proposed what Shawn Ching and Ng believed to be a toxic bond, as part of the company’s expansion plans. “This bond was shown to the sponsor. And the sponsor felt the same,” Ching recalls.
Following the requisition of the first board meeting minutes after April 28, Ching realised that Koh wanted to acquire NGSC in exchange for placement shares issued by MC Payment. NGSC is a company on the SGX’s watchlist and it has been instructed to delist by the SGX.
“I was shocked because we are a payment company. Why should you want to acquire a satellite company that is on the watchlist and has been asked to delist?” Ching says. Moreover, his stake would be significantly diluted.
Ching subsequently requisitioned an EGM to vote in Shawn Ching, Ng, himself and two more board members, and to vote out the board with Koh, former chairman Albert Cheok and two more directors. The EGM was held on June 30, during which all Ching’s proposals met with more than 70% of votes.
“I have a plan in mind, to make MC Payment a better company,” Ching says. His priorities are improved corporate governance, getting in professionals to manage the business and to fill the board with experienced e-payment independent directors.
MC Payment’s revenue is largely from fee income which it collects from its customers which are merchants, small businesses and SMEs that use its platform. The previous management used agents to acquire merchants, narrowing margins.
The new management is already going direct to new customers. Acquiring customers directly should improve margins because the company will not have to pay a fee to the agent. At present, MC Payment’s fees range from 1% to 4% of transactions.
In 1HFY2021, for the six months to June 30, MC Payment reported a net loss of $29.4 million mainly due to one-time RTO expenses of $30 million, of which $26.4 million was a non-cash expense item relating to the writeoff of goodwill for the reverse takeover of the company. Excluding the one-time RTO expenses and a one-time legal fee of $0.16m relating to the EGM on June 30, the adjusted net profit was $0.66 million. Gross profit rose 11% to S$2.8 million in 1H2021, despite a slight decrease in revenue, due to a better pricing strategy, as gross profit margin jumped by nearly 600 basis points to 47.7% in 1H2021.
The opportunity in Southeast Asia is substantial. Last year, the region’s e-commerce market grew 63% y-o-y, to US$62 billion ($84.4 billion). Digital payments are expected to reach US$1.2 trillion by 2025.
Capturing trends
MC Payment processes the payments of 2,000 merchants and their customers. To add to its portfolio of merchants, the company is looking at low-hanging fruit such as facility management companies. In Singapore, Oxley has developed more than 30 such condominiums, which are managed by these facility management companies.
Acquiring more retail, F&B merchants or food processing companies as customers would be of interest, as would companies in the hospitality sector. “There may be smaller companies who want to be part of larger ecosystems, but they would have to be complementary,” says Shawn Ching.
With payment licences in Singapore, Malaysia, Indonesia and Thailand, MC Payment would eventually be able to provide cross-border payment services to its merchants across Asean using the same back-end architecture that it currently uses. The Asean linkages would enable MC Payment to price its services better.
Plans are afoot for a collaboration with partners. “We will not enter the BNPL (buy now pay later) sector, but we will collaborate with them because they need our existing merchants,” Shawn Ching says. BNPL companies such as Pace and Atome are vying for market share, and they could be companies MC Payment collaborates with.
MC Payment has the data of its merchants and their customers, and could offer additional products such as merchant financing. The company could do this by acquiring a platform. “We control the gateway, the low hanging fruit will be in the financing business,” says Shawn Ching.
The company plans to apply for more licences, and Shawn Ching confirms the company is applying for a digital payment token licence. “We are planning to apply for a digital payment token licence and keeping close observation on this sector because digital currency will be the way to go in the future,” he says.
MAS announced it received 170 licence applications from digital payment token (DPT) service providers.
“MAS has recently notified several applicants that it is prepared to grant them payment services licences under the Payment Services Act. Applicants who have received such notifications from MAS do not yet hold payment services licences. A licence will be subsequently granted to an applicant, provided it puts in place necessary measures to meet MAS’s requirements in order to operate as a licensee,” says an MAS spokeswoman when asked about licences granted under the Payment Services Act.
MC Payment’s advantage is its listed status, and it was one of the first companies to get a Payment Service Provider licence.
The business model
MC Payment is an enabler of e-payments between merchants such as retailers and SMEs in the F&B business, and their customers, providing software-as-a-service (SAAS).
With SAAS, the company enables digital payments from different sources such as Fave Pay, Grabpay, PayNow, PayLah!, credit cards, debit cards, PromptPay, WeChat Pay, Alipay and UnionPay to merchants.
MC Payment’s platform is agnostic to brand, e-payment mode and country. Any merchant anywhere can just plug into it.
SAAS also implies that a POS (point of sale) terminal is not necessarily required. In fact for merchants which are MC Payment’s clients, their customers can scan a QR code using a mobile phone to pay the merchant. Through this form of payment, the merchant can keep track of inventory, check the type of goods sold, who bought them, provide discounts, redeem vouchers and so on.
Revenue is usually based on a percentage of the monies processed. Shawn Ching is quick to admit that e-payments is a tough business. He likens e-payments to commodities, which is why the user experience is important.
“Restaurants will let us process their payments if we offer value added solutions. Many (property) facility managers take in cheques. We can value-add to those companies. Some e-payment companies only have the front end solution but outsource the back end (gateway). We can have both,” he says.
For the elder Ching — who has emerged from something akin to a trial by fire — the future is more important than the past. He concludes: “I want to go on a rebranding exercise. All the founders who have held positions in the company have left. The next route is down the road. Shawn has been working very hard with several companies in Singapore as well as abroad to see if we can collaborate further in the e-payment business. I am delighted that Shawn has informed me that he is very close to forming some partnerships.”
