FGF secures slice of ‘highly profitable’ e-commerce payment business

By Meagan Evans. Published at Mar 1, 2019, in Technology

Diversified listed investment company, First Growth Funds Limited (ASX:FGF), has secured an investment in a highly profitable e-commerce payment business that’s growing at 50% per annum.

FGF invests across a broad range of asset classes including listed equities, private equity, blockchain and token offerings and has now secured a 15% equity holding in SQID Technologies Limited. FGF has also been appointed as advisor for the company’s upcoming ASX listing.

SQID is a profitable approved payment aggregator connecting to the banking system via Westpac bank and providing e-commerce, in-store terminals and mobile payments.

Founded in 2006, SQID has built a patented solution with a fully automated business model that leverages strategic partners for its go to market strategy. It has developed and patented multi-factor security technology to deliver the world’s most secure remote payment and identification solutions for mobile and internet banking, shopping and e-Identity applications.

SQID has delivered strong transactional growth and has a solid revenue and earnings profile — transaction processing reached $80 million in 2018, and $60 million in the first half of 2019.

FGF’s initial investment includes $500,000 with the payment held in trust and funds returned to FGF if the listing does not proceed. FGF has also secured a mandate with SQID to provide corporate advisory services for the listing and also post listing. First Growth Advisory will receive a $550,000 fee prior to listing and held in trust which is refundable if the listing does not proceed.

This investment exposes FGF to a large and growing market opportunity. According the Australia Post 2018 eCommerce Industry Paper, Australians spend more than $21 billion each year buying goods online, and that figure is growing.

This private equity purchase, comes at a time when there's been strong interest in the sector, as demonstrated with the recent listing of instalment payment solution, Splitit (ASX:SPT) and the success of buy now, pay later leader, Afterpay Touch Group (ASX:APT).

The company also released its half year report today, providing a rundown of its new investments over the period:

CCP Technologies Limited (ASX:CT1)

CT1 has recently undergone a restructure reducing $1.5m of operating expenditure and expects to reach cash flow natural in second half of 2019. The company has a development team of 25 staff that not only services the existing temperature monitoring solution but also provides contract development work for other IOT companies. This team is now profitable and CT1 is exploring other acquisition opportunities to leverage this team further.

YPB Group Limited (ASX:YPB)

FGF invested $495,000 as a convertible note as part of a $1.5m investment in YPB. FGF led the investment and received a 6% transaction fee. FGF will also receive a 10% interest payment, paid quarterly. YPB has received regulatory approval to launch a digital asset token and has recently received their AFSL authorisation.

LINCD HQ Pty Ltd

FGF acquired 100% of LINCD HQ Pty Ltd, a blockchain as a service company. FGF also provided a loan of US$250,000 for working capital. It was announced in January 2019, FGF had successfully signed a binding agreement with Harris Technology (ASX:HT8) to acquire LINCD for consideration payable in shares along with repayment of the loan provided to LINCD. The transaction is subject to shareholder approval via an EGM.

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