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PUC - An Assessment

PUC has tried to reinvent itself following the untimely passing of its founder last year. His younger brother, who was highly successful in his own right, was running Pictureworks in a number of countries in Asia.

The Shares Price Rise & Possible Catalysts

Share price has broken its all time high comfortably. The rise has been steady and not at all volatile, accompanied by steady volume, which would indicate longer term investors and some funds already accumulating nd not selling back to the market.


Potential Catalyst #1

The just launched Presto app. Tried it and went to the briefing. Its a game changer for PUC for sure. They have already indicated that the e-wallet will be launched only in 1Q2018. Now what is Presto, why Presto. Its very much like Lazada or eBay or Alibaba. Lazada is a platform for retailers to sell, full stop. eBay is more for the personal one man operations. Alibaba is more for wholesalers and distributors.

Presto links retailers/f&b/services originators with end clients. The twists are: elevating social marketing to earn points and cashback. When you purchase something, you can post it on FB or Instagram, etc... the more your circle of friends purchase, the most cashback you get. It empowers the purchaser. By dealing direct with retailers, business owners can offer most of the "cost savings" back to users/buyers. Plus its a loyalty cycle. This should see a high degree of adoption by retailers/f&b/services originators to Presto. My view is Presto will be successful in obtaining critical mass. How does PUC make money from it? There is a flat 5% transaction fee taken from the sellers. That could add up very fast. Presto, if you ask any merchants, is a lot more attractive than the blood sucking Lazada and 11th Street... just go ask the merchants.

I think presto will be very successful where Groupon was not. The model operated by Groupon was severe on merchants/retailers/service providers... G would take btw 30%-50% of the value of the deal, hence most merchants are actually not making any money, sometimes losing money. On Presto, they just pay 5% transaction fee, and can offer 20%-30% or more to end users, they still can manage their margins well. I think F&B and service providers will be the best two segments for Presto to succeed in.

Why is Presto important in the overall scheme of things? It has to tie in with the e-wallet. You cannot/should not launch an e-wallet without a strong community base. Look at the successful players:

ALIPAY       ~~~       Taobao
Wechatpay ~~~       Wechat
PrestoPay   ~~~       Presto

The top two's payment gateways and payment solutions can only be so successful thanks to its community site. Its great strategy thinking ahead.


Presto e-wallet

This is likely to be launched in 1Q2018. The Presto app has to be launched first before the e-wallet for reasons cited above.


China's biggest social network and gaming firm Tencent Holdings, which last week reported forecast-beating quarterly results, is close to making Malaysia the first foreign country to roll out its WeChat ecosystem, an executive told Reuters.

Tencent has made a "breakthrough" in gaining an e-payment license in Malaysia for local transactions, and plans a launch early next year, senior vice president S.Y. Lau said in an interview.

The move pits Shenzhen-based Tencent, Asia's most valuable listed company, against rival Alibaba Group as they scramble for new growth opportunities outside China.

"Malaysia is actually quite large in the sense that we have 20 million WeChat users, huge potential, and the market is quite warm towards internet products from China," Lau said.

Southeast Asia, home to more than 600 million people and some of the world's fastest-growing economies, has been a key battleground for China's tech titans fighting for deals. Ethnic Chinese make up more than a fifth of Malaysia's population.

WeChat Pay and Alibaba's Alipay, which dominate China's digital payment market, have sought to expand their global footprint, although that push has so far been limited to payment services for Chinese outbound tourists. They can scan-and-pay for purchases in 34 countries or regions via Alipay and 13 via WeChat Pay, according to the companies.


Read more at https://www.thestar.com.my/business/business-news/2017/11/21/tencent-plans-e-payment-launch-in-malaysia-next-year/#Mc0lQ48epYHda7GA.99

If you hear market whispers, you cannot say you have't heard that PUC might be the local partner for Wechatpay. This might be conjecture for now or pure speculation. Not to fan the fires of rumours, but we have to assess the possibility. If not PUC... who then???

While the potential of being link up with Tencent is very positive should it happen, how do you quantify the monetary benefits? Its up in the air, in fact, I think the Presto app has real potential to quickly translate into profits for the bottom line.

Let's not forget that PUC is already a substantive player in internet advertising and social marketing, and that comes in handy to leverage and help sellers on Presto.


Potential Catalyst #2

The upcoming EGM (21 Dec) will see holders of the ICULs voting to change the usage for the funds raised from power generation to e-wallet. That is very likely to be approved because if not approved, the ICULs holders will get back 4-5 sen, compared to the current market price of 20 sen. Thats a lot of firepower for e-wallet... some RM36m. The funds are just sitting there in the bank for the longest time.

This may be a catalyst but should not explain and cannot justify the share price jump ... maybe it can explain 10%-15% of the share price jump only. Still, the fact that it is likely to have the funds will go a long way to jump starting Presto app and PrestoPay.

Catalyst #3 Pictureworks

By all calculations PW is a lot bigger and "more successful" than PUC's original biz model. Just have a good read up on PW and CCC in the attached articles. 

Owing to the fact that the younger brother had to take over PUC, it is highly unlikely he will have the time to go running around Asia to run two companies. Just look at the corporate announcements over the last 9 months, PUC has bought or enter in jvs or partnerships that basically re-emphasised PUC's change in business direction to that of technology (social marketing, payment systems, social apps).

But there is still not a need to incorporate PW into PUC. I believe there are solid reasons for thinking PUC might buy a certain stake in PW.
a) alignment of two companies into one - the owner will then be able to harness resources of two into one
b) saves on time to manage two separate companies
c) if you read the interview, there had been many bankers proposing to list PW in Hk and Shanghai, even at a valuation as high as USD250-400m, but the owner thinks that is undervaluing PW and is willing to wait for USD1 billion ... if PUC does buy a certain percentage of PW, that would by the owner a lot of time to wait for that USD1 billion valuation
d) if there is any purchase of a minority stake in PW (cause there is no way PUC can buy a majority stake in PW based on PUC's low market cap), it is likely to be at a very low valuation, which will bode well for PUC... by virtue of having the same owners, PUC can account for PW's earnings as well even if its just a minority stake 

I do not have to elaborate how attractive PW is - you do not become the image/photography partner for two Disneylands and  Kidzanias for nothing. So much so that PW's biggest partners, including Canon and Fuji Photo,  have been very keen to buy stakes in PW.

Users will know that its not just a photography tool, its interactive and can convert files into moving images, and can intersperse "active backgrounds" for pictures. The app can easily win over a lot more theme parks/important sights/towers/entertainment outlets/recreational sites and parks.. moving ahead the adoption of the tool is likely to be via cloud computing and the owners of these recreational places basically pays a high rental fee to use the app. They will too because it brings in more revenue, profits and enhances the overall enjoyment and users' experience. Just 1,000 recreational clients paying say USD10,000 a month = USD10,000,000 a month. Guess how many theme parks in China alone ... don't even say USA.




Final Word
The share price rise of PUC has been one of the steadiest I have seen on Bursa for a long time. The thing is, if its just the first two catalysts, the current share price would not be justifiable at all. So either the third catalyst had to happen, or should happen, and if it happens, then 30-40 sen is not unreasonable as that would put the market cap of PUC at still below RM500m. The flow on of profits and earnings would be visible.


p/s this is not a recommendation to buy or sell... just an opinion based on available information and debating the hearsays ... please contact your dealer/remisier before making any decision




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