February 11, 2022 (MLN): SPV, a separate wholly-owned subsidiary of TRGI which was created to capitalize certain proceeds from the sale of e-telequote, has already utilized $34mn to buy 48.9 million shares of TRG Pakistan, the management of the company informed while holding a corporate briefing session yesterday.
It now has funds worth $85mn available inclusive of a deferred portion which the management expects that SPV will deploy in a few days after transitions related to the SPV board are completed.
Moreover, it is up to the management of TRG Pakistan to decide whether to cancel those SPV shares or to retain them, according to the key takeaways covered by Alfalah CLSA.
To note, a special independent board of directors has been formed by TRG International for running the SPV and for transferring value to TRG Pakistan shareholders in the most efficient way.
Earlier, on Dec 10, 2021, the TRGI board had approved the allocation of its liquid assets to its shareholders whereby TRG Pakistan’s portion was $119mn (inclusive of around $10mn in deferred cash) plus approximately 5.4 million shares of its listed portfolio company, Ibex Limited.
After this development, the board of TRG Pakistan decided to continue with its investment in TRGI in order to maximize the value and capital return of its proceeds for the company and its shareholders.
Considering its request, TRGI formed an SPV for utilization of all or part of these liquid assets to purchase shares of TRGP from the stock market from time to time, in order to provide value, benefit, and liquidity to the shareholders of TRGP.
The management started off by stating that they are seeking to make the company more transparent by taking measures to increase more shareholders' interaction.
To highlight, TRG Pakistan primarily derives its value through IBEX and Affinity where it has an 18% holding in Affinity (8.9mn shares) & a 30% holding in IBEX (5.4mn shares).
During the briefing, the management of the company stated IBEX, listed on Nasdaq since 2020, is expected to post $474-482mn revenues in the current fiscal year. It has shown historical revenue growth of 10%.
However, its revenues were flat in 1QFY22 on the back of a slow down in the company’s legacy (Telco) business.
Due to its global outreach, the company has 31,000 employees and 21,000 workstations. The company pivoted towards a digital-first client base in 2016. This segment grew 34% YoY and currently accounts for 62% of total revenue, the report said.
With regards to EBITDA, during FY21, it stood at around $66mn and is expected to reach around $69-70mn in FY22 due to future growth prospects.
Speaking of Afiniti that has a strong foothold and is currently handling more than 1 million interactions daily, the management stated that its revenue has been lumpy. The company had flat revenues within FY18-20 but it grew 300% in FY21.
Going by the report, some clients have recently opted for contracts on pay for seat method. After the recent turn of events, currently clients are in wait and see mode. The company is currently preserving revenue but it shortly expects the growth to resume. The management is not seeing any monetization event in 2022.
Afiniti currently has a global workforce of 2500 people and the management expects this number to stay relatively stable for the next couple of years as it already increased headcount recently in anticipation of higher revenue. NTM multiples of high growth software companies have seen deterioration in the recent past and these companies are now trading in the vicinity of 9x NTM revenue down from 15x NTM revenue a few months ago, it added.
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