TRG Pakistan (TRG): 9MFY24 corporate briefing key takeaways

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TRG Pakistan (TRGP) through its associate company TRG International (TRGI) holds a stake in three assets; Afiniti, Ibex, and liquid assets (Greentree Holdings).

TRGP through TRGI holds 17% and 30% stakes in Afiniti and Ibex respectively. The liquid assets are US$30mn cash and 155mn shares of TRG Pakistan. These assets are placed in an SPV called Greentree Holdings.

Ibex Limited as per industry expectations will have revenue of US$506mn in 2024. This is a decline of 3% over 2023. Reasons for lower revenue are general industry decline and the potential threat from generative AI (virtual agents).

The company is currently evaluating whether AI based virtual assistants will replace agents or enhance the customer experience with agents. Ibex has also started providing virtual agent solutions as part of holistic mix.

Ibex has adjusted EBITDA of US$61mn and as per analyst expectations, the company is expected to post EPS of US$2.05/share in 2024 compared to US$1.96/share in 2023. The company has a net cash of US$50mn.

BPO sector valuations have come down from the peak. Sector PE ratios are between 5-9x currently from 14-16x in June 2022. This has been due to a wider industry trend of non-Big Tech and Generative AI stocks coming down in valuations. There is an impact of threat from virtual agents.

Ibex has 32k employees of which 7k are in Pakistan. The company has a workforce in Central America, Jamaica, Philippines and Pakistan.

Afiniti had revenues of US$266mn in 2023. However, revenues are expected to be lower in 2024 due to the impact of the top 2 clients facing economic pressure.

The company has been EBITDA positive since 2H2022 after being negative previously. Besides this, the company has US$500mn of Net Debt. The company has to pay an annual interest of US$50mn on its debt. The company is in discussion with lenders to reprofile debt and extend maturities.

Software as a Service (SaaS) revenue multiples have decreased to 3-4x from a peak of 6-7x which is hurting the valuation of Afiniti.

Afiniti is in the process of adding new products; Mega, Airo and Minerva (customized virtual assistant).

Afiniti has a global workforce of 1,500 employees of which 1,000 are in Pakistan.

Courtesy – Topline Research

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