A Hidden Gem in the Russian Payment Processing Business, OTC:CMPY ComePay, Inc. Building strong base above $4
Some of the sweetest stocks in history sit on the intersection between finance and technology. After all, we’re all here to keep the cash flowing. (Finance.) Gadgets and code make it flow faster. (Technology.)
Bring those two pieces together in the right way and anyone who jumped on the PayPal or Square IPO can tell you that the gratification can be close to instantaneous.
But we weren’t all that lucky. That’s why I make a special effort to get these “fin-tech” stocks on my radar as early as I can. Just a few days ago a new one pinged my screen. Little company called Comepay, Inc. (OTCPK:CMPY).
When I saw the particular spin on financial technology that CMPY is working, my pulse picked up. “This could be the company I’ve been waiting for,” I muttered to myself.
Normally I don’t do that, but this one checked all my boxes.
Does CMPY alter the financial landscape? Definitely. Nobody else is doing this. Not PayPal, not Square, not Visa or MasterCard. This is a true disruptive opportunity, a “killer app” in the making. I love those.
Are there immediate revenue opportunities? Oh yeah. This isn’t one of those theoretical propositions that could change the world if only people decide to throw it money. CMPY already generates millions in gross revenues and has a solid foundation for its current growth opportunity.
Is this as good as it gets? Hell no. Everything CMPY has achieved so far is only the prologue to what could become a global world-changing enterprise. The potential is huge and management has realistic plans for making it happen for shareholders.
Do they have what it takes to do that? You might not have heard of this company before today but it’s no startup run by kids. They’ve already built a network that stretches across a continent . . . and now they’re eager to take things to the next level.
Has the stock run as far as it can? No way. While CMPY has already TRIPLED since last May, the ultimate sky is still wide open down here below $5. PayPal was already above $10 when it went public. Square was $9 on its IPO . . . DOUBLE where this still-little stock is now.
Is this too good to be true? Amazingly, no. CMPY trades down here for a few reasons, including exchange rates and a recent pivot in the overall operation to position themselves for future growth. But as the past recedes, management is free to focus on the big goals. Eyes on the prize!
They’re right to go for the gusto. Consider PayPal, which went public at $13 back in 2002, got bought at $23 five months later, spun back out at $39 and is now nudging around $100 a share. End to end gain for 17 years: 638%.
No wonder PayPal insiders like Elon Musk and Peter Thiel are financial heavyweights today. Getting in early and riding the wave made them billionaires, set for LIFE. Now they do whatever they want.
And the cycle has only accelerated. The next “fin-tech” blockbuster to go public was Square, which hit the market at $9 three short years ago. Today Wall Street spends a lot of time bickering whether the stock is worth $80 or $100 in the here and now . . . the ultimate potential remains to be seen. End to end gain in 3 years: 733%.
Yeah, Square did all the work of PayPal for shareholders in maybe 1/5 the time. Money is moving faster in this space. The excitement is building.
Wall Street STILL can’t get enough. Square trades at 20X revenue. Forget earnings at this point. The company is growing so fast this is the multiple we need to use. PayPal is a little more sedate, 7X revenue because it’s “only” expanding 20% a year.
For CMPY to grow into Square’s valuation it would need a market cap of $440 million just to line up with 2017 sales. Divided by 67 million shares, you can probably do the math on that comparison . . . keeping in mind that we’re using 2017 numbers here.
Granted early 2018 was a pivot year. CMPY does its legacy business in Russia and the ruble gave up ground, hurting the numbers when translated back into USD. It happens. Costs associated with market entry for their planned business expansion also hit their books in fiscal 2018. Necessary growing pains. But from here, things get really interesting as management starts opening up new markets.
CMPY started out building a network of payment kiosks in Russia, sort of the opposite of the Western ATM that spits out cash so you can buy stuff. In this network, you feed cash into the machine and then it settles your outstanding accounts.
It’s a big network, one of the major players that other local payment companies cite as a constant competitive threat. And keeping all the moving parts moving taught CMPY a lot about keeping a data record of every transaction.
The ledger is what the technology industry calls “robust.” It scales. We’re looking at 4.7 million transactions per month across Russia, from over 12,500 machines. That’s 12 transactions per unit a day. The cash comes in, the payments go out. Margins aren’t huge in this space (it’s all about volume) but the fees easily add up to millions in gross revenue.
And yeah, at that scale, just serving the home market generates a trickle of gross profit. CMPY is no startup starving for cash and eager for a handout. Cash is flowing. To scale up our business model and break into a larger market opportunity, the Company is also bringing in investment dollars for expansion into another highly scalable market segment. The plan….. as the business expands, the cash flows faster.
That’s why it’s such a thrill to see management think outside the existing box. First, they applied their payment expertise to a line of cash registers. Simple logic, right? If you know how to log remote transactions, you can bring it back to the point of sale.
You can bring it back to the store. Take the cash, run the receipt, hand out the stuff. This is especially important in Russia where cash is 60% of all transaction volume and the government insists that all merchants keep a digital record. Not a paper ledger, recording the activity right there in silicon format.
CMPY already knew how to log cash transactions. It can support that digital record and give the government the data it wants. So when the government mandated digital reporting starting 2017, it started building cash registers that included that functionality right there, already built into the system. World-class companies like Volvo have signed up.
Cash registers are a ruthlessly competitive business. Some vendors like to provide a no-frills commodity-priced experience that people hate to use. Others sensibly layer added functions on top of the basic calculator to attract business. Comepay’s years of expertise in software and hardware position them to perfectly to offer a streamlined product with high functionality that actually makes users lives easier.
Inventory tracking can sit on top of the basic cash drawer. You can use the register to mark merchandise “sold” and remove it from your digital “shelves.”
A good register will analyze sales patterns. Management loves to see what’s hot and what’s not. Are they leaving profit on the table? Can they double down on the sizzle and not reorder the slow stuff next time?
CMPY has so much value to add here that they can sell the hardware to recover hard costs, add a base subscription for the backend software and then entice higher margins with enhanced services. You guessed it: the device doesn’t carry the real load here. It’s not a loss leader but it’s priced to get people to start using the platform.
Once they do, they’re pretty much captive. The more they rely on the insight the software provides, the deeper the relationship gets. Reading between the lines, this is where the real profit kicks in.
Remember, merchants in Russia need this level of machine anyway just to keep the regulators happy. They’re committed to spend money on a modern cash register simply as a matter of staying in business.
By adding value, CMPY turns that universal overhead into a differentiator and an opportunity. To me, that business model sounds like Apple right now: it’s not so much about the phone as the apps. The iPhone, wonderful as it is, is only the gateway into the Apple service ecosystem.
The phone, like the CMPY cash register, is a trojan horse getting the manufacturer into a recurring revenue relationship. I can’t argue with that proposition. It’s built trillion-dollar companies.
And here’s the thing: CMPY is expanding beyond its borders. Unbundle the software from the register . . . and store operators have similar needs all over the planet. PayPal and Square are a little weak on that business-to-business front. They’re lucky to run a credit card swipe.
CMPY has handheld payment machines, by the way. Look out, Square! Anyone on the planet who wants to get paid on the move can use this gadget. Think delivery people. Think restaurant staff. Think outdoor markets.
Or take the software and bring it to e-commerce. CMPY can do that too. Sales are sales and it’s always worth tracking what you sell. They have set up an entire data center just for this purpose. If you need to track cash, great. If you need to accept cash on your site, I bet the technology can stretch in that direction too.
Is this a PayPal killer? Hard to say. Fun fact, PayPal loves paying top dollar to acquire rivals before they get big enough to become a threat. It could happen here. In that scenario, the clock is ticking fast on how long CMPY will be available at any price.
Remember, the company knows how to track cash transactions so well that it satisfies Moscow. They can do something similar for dispensaries struggling to keep an ironclad data record of every customer.
But that’s another story and purely hypothetical at this point. If CMPY goes that way . . . wow. I’d hate to miss a beat of that journey.
Look where the stock has already been. Get ready to embrace the future:
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