Pax Global: 2020 Earnings – 12 Points
- Rupam Deb
- Apr 23, 2021
- 3 min read
On 29 March 2021, Pax Global released its full year financials ending 31 December 2020.
Despite the Covid-19 pandemic bringing unprecedented challenges to almost every country in the world in 2020, Pax has performed well. As countries implemented strict control measures, people have been using less cash, while contactless payment has quickly become the preferred payment method for consumers. The global E-payment terminal industry is moving into a fast lane, and Pax has been working more closely with banks and payment service providers around the world, growing its revenue by 15% and net profit by a whopping 45% in 2020.
Here are our 12 key takeaways from the earnings results and earnings call, including its developments on the hardware and software fronts, and our comments on its valuation!
Revenue in 2020 increased by 15% or HKD 0.7 billion, from HKD 4.9 billion in 2019 to HKD 5.7 billion in 2020.
The increase was mainly driven by revenue growth in the EMEA region (which is the Europe, Middle East and Africa region), which grew by 37% or HKD 341 million. Since March 2020 a number of European countries have successively raised the limit for contactless payment. In Europe, especially Italy and Eastern Europe, PAX achieved significant sales growth. In the Middle East and Africa, PAX achieved significant growth in shipments to Egypt, Nigeria, Saudi Arabia, as well as other Gulf Cooperating Council countries.
The North America region also grew fast in 2020 at 47%, with Pax entering into strategic cooperation with major payment processing companies in the United States and deployed more innovative Android terminals through its nationwide network of Independent Sales Organizations. Pax mentioned that there is a lot of good news for Pax in this market, which Pax will announce when the time is right.
Meanwhile the APAC region excluding China grew at 12%, with growth in India, Japan and other Southeast Asian countries. The LACIS region (which is the Latin America and the Commonwealth of Independent States region) grew slower at 8%.
Gross profit in 2020 increased faster, by 20%, from HKD 1.9 billion in 2019 to HKD 2.3 billion in 2020. The gross profit margin increased by around 2 percentage points, from 39.5% in 2019 to 41.4% in 2020. The increase was mainly driven by the change in sales mix, with higher sales of Android models, comprising 30% in 2020 compared to 20% in 2019.
The total operating expenses in 2020 grew at 7% (or HKD 87 million), slower than the growth rate of both revenue (of 15%) and gross profit (of 20%). The increase of HKD 87 million was mainly driven by an increase in research & development (in short, R&D) expenses of HKD 62 million, and an increase in selling expenses of HKD 34 million. This is offset by a decrease in administrative expenses excluding R&D of HKD 24 million.
As a percentage of revenue, R&D expense was 8.2% in 2020, slightly higher than the 8.1% in 2019, as Pax sped up the R&D process of Android products and certification, and increased investment in software and services. Chairman Lu Jie shared that most R&D engineers are doing R&D on the software side.
Meanwhile, selling expenses dropped from 9.5% of revenue in 2019 to 8.8% in 2020.
As total expenses grew slower than revenue and gross profit, Pax’s operating profit grew much faster at 40%, from HKD 762 million in 2019 to HKD 1,067 million in 2020. The operating profit margin increased from 15.5% in 2019 to 18.9% in 2020.
Profit after tax also grew even faster at 45% (due to a lower effective tax rate in 2020), from HKD 625 million in 2019 to HKD 904 million in 2020. The net profit margin increased from 12.7% in 2019 to 16.0% in 2020. Basic earnings per share is around HKD 0.83 in 2020, 46% higher than the HKD 0.57 in 2019.
For the remaining points, check out our Multibagger Research Series at https://moneywisesmart.com/MultibaggerResearch/
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