TRG Pakistan (TRGP) conducted an analyst briefing on 27th June 2023 to apprise on operational performance and future outlook. TRGP, through its associate TRG International (TRGIL), has 17% stake in Afiniti and a 30% stake in Ibex Limited. Besides the company has an SPV called Greentree which has US$33mn and 156mn shares of TRGP. 156mn shares represent a 28.6% stake of TRGP.
Afiniti is an enterprise software company. It helps in better call centre pairing of service delivery people with clients.
Afiniti as of March 31, 2023, has last twelve-month revenue of US$270mn and adjusted EBITDA of US$60mn. The company has gross margins of 75%.
The company’s bottom line takes a hit due to a Net Debt of US$500mn. This debt had been used to finance R & D for the company.
The company has launched two new products by name of Airo and Mega. Afiniti has a risk of having a small portfolio of clients. Airo will help to gain more clients with smaller call centres. Mega on the other hand, is a vertical integration which helps with routing the calls.
Afiniti has a workforce of 2k, 1.2k of which are in Pakistan.
Currently, similar mid-cap companies are trading at revenue multiples of 5-6x.
Ibex is expected to post FY23 revenue of US$525mn with an adjusted EBITDA of US$89mn. This is the highest EBITDA in history.
Ibex has an operational footprint of 34 locations, 21k workstations, and 31k employees. 7k employees are present in Pakistan.
The last ten-year revenue growth stands at a CAGR of 10% in US$ terms.
Two big mergers of peers took place in March/April 2023 with EV/EBITDA valuations ranging from 7.5-9.5x.
The third asset of TRGP through associate (TRGIL) is Greentree SPV. US$118mn were transferred to SPV from the sale of E-Telequote. This has been utilised to buy TRGP shares while the US$33mn amount is still remaining.
Regarding AGM management commented that the matter is pending due to the stay order of Sindh High Court and clarity will emerge after the court gives green light.
Regarding future direction, management commented that current investments will be nurtured and monetized which includes the monetization of Afiniti..
Courtesy – Topline Securities