Canada’s fintech sector grew by leaps and bounds in 2017, but there’s still a lot more disruption ahead say the field’s proponents, who contend that the traditional banking system will continue to be forced into an adapt-or-die mode by emerging technologies.
There’s blockchain and cryptocurrencies to contend with, of course, but fintech supporters also see demographic shifts to be fundamentally altering the marketplace, arguing that there’s a no-ticeable generational gap when it comes to banking habits and proclivities. Polls show, for in-stance, that millennials are far more comfortable with financial services like mobile payments and robo-advisors than are Gen X and baby boomers.
So while the big banks keep trying to play catch-up in 2018, here are five fintech notables for investors to keep an eye on.
Mogo Finance Technology (TSX:MOGO)
Online lender Mogo was a top tech performer in 2017 and many are predicting more of the same for the new year. The company says it’s on board with catering to the new generation’s financial interests, providing “mobile first” banking and, forthcoming, the launch of its blockchain-backed MogoCrypto service to handle members’ digital currency transactions. At the end of December, Mogo closed a $26.25 million bought deal, a financing that is aimed at supporting the company’s digital plat-forms and products.
“The Cryptocurrency space is very fast moving,” says Nikhil Thadani, analyst with Mackie Research Capital, whose recent research report gave Mogo a “Speculative Buy” rating and a one-year price target of $12.00 (a 90 per cent return at time of publication). “Therefore, it is important Mogo’s new Crypto features launch rapidly and scale (a major stumbling block with most existing on-ramps) in order for Mogo to gain market share (and potential valuation lift) in this market. We expect positive news on various initiatives in Q1.”
Another strong performer last year, VersaPay’s cloud-based accounts receivable platform is starting to gain wider appeal. Over the second half of 2017, the company scaled up its customer base by more than 80 per cent, gaining major clients like RBC along the way.
In October, VersaPay closed on a $10.7 million private placement, which the company said will help fund expansion into the United States. That deal was supported in large part by Fidelity In-vestments, which accounted for about 90 per cent of the financing, making Fidelity VersaPay’s largest shareholder.
“(The vote) of confidence from Fidelity and the large cash balance should help secure large enterprise customer wins and new channel partners,” said PI Financial analyst David Kwan, “especially in the US, where customers may have previously been concerned about doing business with a small, emerging fintech.”
GoldMoney’s 2017 started slow but certainly ended with a bang, with the share price rising from a low of $2.36 in August to the $6 range by November, hitting a high of $7.95 in December. The gold-backed financial services company closed a $30-million bought deal in October, which the company says will further its blockchain-related infrastructure.
It also announced plans to gain a toehold in the Chinese fintech market with the launch of GoldMoney China, an agreement with Zhaojin Mining, China’s second-largest gold mining com-pany, to run a version of its products in Zhauyuan, Shandong Province. Thadani sees the devel-opment as having a big potential upside. “China is acknowledged as the world’s top consumer, producer and importer of gold,” says Thadani. “XAU could become an interesting vehicle to gain China fintech exposure.”
For 2018, Thadani projects that Goldmoney will generate EBITDA of negative $5.27-million on revenue of $509.9-million and he expects those numbers to improve in 2019 to EBITDA of nega-tive $7.02-million on a topline of $632.9-million.
Glance Technologies (CSE:GET)
Another stock that took off during the back end of 2017, Glance made a number of moves that caught investor attention. The mobile payment company announced in the fall that along with anti-fraud technology for its Glance Pay mobile payment (touted as a more secure platform than Apple Pay), the company would be launching its own rewards-based cryptocurrency for its mo-bile applications.
The company just completed an $11 million bought deal led by Echelon Wealth and PI Financial and recently accomplished what Bloomberg has called the “buzzword triple play” (blockchain, fintech and cannabis) by licensing its payment platform to newly created Cannabis Big Data, which aims to provide CRM services to the marijuana sector.
Cortex Business Solutions (TSXV:CBX)
Automated e-invoicing company Cortex turned a corner in 2017 with its first quarter of positive net cash flow from operations, improving its overall cash position in the process. Calgary-based Cortex is taking on more customers and increasing margins, says Pardeep Sangha of Haywood Securities, who in December raised his one-year price target on Cortex.
“We believe Cortex is significantly undervalued,” says Sangha. “Cortex is currently trading at a 2.3x EV/Revenue multiple of our CY18 estimates, which is lower than its peer group average of 5.2x EV/Revenue multiple of consensus CY18 estimates.”
Sangha believes Cortex will generate EBITDA of $2.1 million on revenue of $13.8 million in the 2018 fiscal year and expects an improvement to $4.1 million on a topline of $18.5 million the following year.
Disclsoure: Mogo is a sponsor of Cantech