AGS Transact Technologies to launch IPO on January 19; should you subscribe – know what analysts opine!

Omni-channel payment solution provider AGS Transact Technologies Limited will be launching its three-day Initial Public Offering (IPO) on Wednesday. Majority of analysts either recommend investors to avoid this issue or give a 'Neutral' rating for the subscription of the IPO. 

The analysts list out mainly two basic reasons to stay away from this initial share sale - one is the muted annual earnings performance and the other is higher valuations of the company than peers.  

See Zee Business Live TV Streaming Below:

CMS Info Systems IPO was from the same segment and caters to services similar to what AGS Transact Technologies deliver. 

According to brokerage firm Angel One’s DVP- Equity Strategist, Jyoti Roy, the company derives majority of its revenues by providing various services to the banking sector. It primarily operates into three segments: Payment Solutions; Banking Automation Solutions; and other Automation Solutions. 

At the higher end of the price band AGS Transact would be trading at P/E multiple of 38.5xFY21 EPS which is at a premium to what CMS Infosystems shares are available at, Roy pointed out.  He has a NEUTRAL recommendation on the IPO given the premium valuations, high client concentration and losses in first months of FY22. 

Meanwhile, brokerage firm Swastika recommends an Avoid on the public issue indicating that the company’s bottom and top lines have been either weak or muted for the last three years and the share price is slightly higher than listed its peers. It estimated the PE of 38x and P/BV of 3.71x on the NAV of Rs 47.11 for AGS Transact. 

The company's revenue has been flat over the last three years, mostly on the declining side where, in FY21 it fell to Rs 1,797 crore from Rs 1,833 crore in FY20. Company's profit has also decreased from Rs 83 crore in FY20 to Rs 54.7 crore in FY21. Similarly, its margin shrank too. 

The other concerning issue is the government’s interest into digital payments, Swastika said, “The government's focus on digital payments will further decrease the use and availability of cash can have an adverse effect on business activities.” 

The Rs 680 crore IPO is purely OFS (Offer-For-Sale) and will be active till January 21, 2022. The qualified institutional buyers have been allotted 50 per cent, followed by retail investors with 35 per cent share while non-institutional buyers get a 15 per cent quota of the total issue.