Following weeks of several containment measures and the successful control of the Coronavirus, the Government of Malta started to ease restrictions during May, which among others included the re-opening of Malta’s airport to passenger flights on July 1. This instigated significant interest in MIA shares, with the share price reaching the €6.0 level, representing an increase of 20 per cent from the previously traded price of circa €5.0.
RS2’s shares also rallied last week, as the Group, on 2 June, announced that one of its subsidiaries has concluded a major 10-year processing outsourcing agreement with one of the largest acquires in the US. Following this positive news, RS2’s shares jumped to €2.28 on the following day, and subsequently closed at €2.30. This reflects an increase of 15 per cent from the previously traded price of around €2.0.
MIA’s developments to date
Prior to the outbreak, MIA was one of Malta’s top performing companies, with both revenue and earnings growing at double digit figures between 2017 and 2019. However, as it is clearly known, the COVID-19 pandemic decimated the aviation industry. As MIA’s CEO stated during a news interview, “The industry has not had a slowdown. We essentially hit a brick wall”.
The negative repercussions of this outbreak resulted in MIA suspending its €100 million expansion plan. MIA’s CEO also noted that under a best case scenario, tourist passenger numbers will not return to pre-pandemic levels until at least 2023.
However, the strict policies enacted by the local health authorities and the Government ensured that the COVID-19 spread in Malta will be as minimal as possible, with relatively few cases and deaths. In fact, for the past days active cases has remained below 30 and as at the time of this writing stood at 26.
The Government announced that initially it is expected that travel will be restricted to 19 countries, however this will be gradually increased as the virus is further contained globally. Mandatory quarantine has also been lifted for passenger arrivals from these countries.
As flights start to operate, it will be interesting to analyse the passenger traffic figures released monthly by MIA. This will assist local investors to gauge the potential impact on MIA’s revenue for this year, in addition to the recovery of the aviation industry post COVID-19.
RS2’s developments to date
For the past few years, RS2 has been on investors’ radar. Despite the current unprecedented situation, 2019 and 2020 are proving to be pivotal years for the Group. During FY19, the Group had successfully secured new contracts and opened up new verticals within several regions concerning processing services as well as generating revenue for the first time through its US operation.
During the first quarter of 2020, the Group achieved two other important milestones. The first being an acquisition of a commercial network operator for electronic, card-based payment systems in Germany and the second relates to a partnership agreement entered into with MoviiRed based in Colombia.
As per the recently issued 2019 financials, RS2 expects several projects to materialise during 2020. These include, new projects in the USA, where two clients which are expected to go live in Q2 2020 and at least three more clients, of which one is significant, will go live in Q3 of 2020
Moreover, in the Asia-Pacific region RS2 revealed that it has also been gearing up to on-board into live production one of the largest financial institutions in Australia and New Zealand in Q2 2020. While, the Group also announced that the financial institution licence is expected to be issued during mid-2020.
The latest announcement with regards to the 10-year processing outsourcing agreement with a large acquirer in the US, provides investors with a confirmation that the Group’s underlying software platform, BankWORKS®, has huge potential and will play a crucial role in terms of RS2’s overall expansion strategy. Ultimately, the milestones reached by the Group throughout the current financial year illustrate that RS2’s large investment implemented over recent years is gradually coming to fruition.
Disclaimer: This article was issued by Rowen Bonello, research analyst at Calamatta Cuschieri. For more information visit www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.