AlphaValue Corporate Services
This research has been commissioned and paid for by the company and is deemed to constitute an acceptable minor non-monetary benefit as defined in MiFID II


Bloomberg   KEYW BB
Smart Cards-Security  /  Belgium  Web Site   |   Investors Relation
The soft bet is paying off
Upside 116%
Price (€) 1.02
Market Cap (€M) 24.0
Money Making

Most of the cash generation comes from the terminals and authorisations divisions, which currently represent the majority of the revenues. The software division is expected to be an important value creator in the coming years and the group is pursuing a growing and innovating strategy.

The profitable terminals and authorisations divisions

Even though Keyware has decided to focus on software rather than hardware, this division (including terminal rentals/sales and authorisations) remains a source of income for the group. The first step to secure this business has been the extension of the contract life to 60 months (€750 of penalty otherwise), which leaves the customer captive to the company. The silent renewal is another source of cash: if the customer doesn’t show its intention to end the contract at the end of the 60 months, another year is automatically added on to the contract.

In this market, there are three key drivers:

  • The quality of service, especially the hotline: one of the strengths of Keyware is to be very reactive and be able to deal with problems very quickly, justifying the premium by the quality of its service.
  • Its proximity to the customer’s needs, especially when it comes to the customisation of terminals. Keyware can propose to add exclusive features to standard terminals, hence justifying a premium by the importance given to them by the customer.
  • The flexibility of its solutions: customers don’t buy the terminals but rent them from Keyware, which gives the former the possibility of upgrading the machines at any time if they wish (through an extension of the duration).

The quality of customers is also of much importance as an insolvency directly impacts sales. At the signing of the agreement, the entire amount of rent for the 60 months is recognised, while the cash is received only in each quarter. Therefore, a default of a payment can reduce sales and represent a certain risk for the group.

Finally, the installed base of terminals will be leveraged in the Authorisations business, which provides acquiring services to the merchants. It represents significant potential for operating profit upside, given the transition from a shared revenue model to a brokering model, whereby the company buys the transaction from the acquirer at a floor price and sells it on to the customer at a discretionary price, thus leading to a substantial rise in revenues for the same number of transactions.

A “soft” transition phase

The transformation of the group to a software provider implies significant changes in the way of making an operating profit. The software division, gathering together Magellan and EasyOrder, is currently a niche market with strong growth potential.

Magellan provides SAAS components, which are sold to customers through a licence at the signing of the contract. Magellan, initially a technical company, has become, through Keyware, more commercial. The group is currently considering trade transactions and applying commissions, complementing the licence revenue. The instalment pay service (Split) looks to be the most profitable in the coming years as the decreasing purchasing power made this solution interesting. It allows companies, such as Volkswagen (one of Magellan’s biggest customers) to increase their sales potential.

EasyOrder has taken advantage of the growth in the food delivery market, offering to retailers the possibility of proposing their products to customers through a smartphone application. Revenues come from rental and maintenance services, like the payment terminals division.

The software allows the company to realise:

  • synergies: customers of Magellan and EasyOrder will also need electronic payment solutions proposed by Keyware. Therefore, the group makes a profit on the licence sold and on the payment electronic contract which follows the deal;
  • an important cash generation and return on investment: as costs represent principally marketing and advertising charges, contrary to the terminal division which involves significant capex.
Change 22E/21 Change 23E/22E
  12/21A 12/22E 12/23E 12/24E €th of % total €th of % total
Total 119 442 811 947 323 100% 369 100%
Terminals 566 509 484 411 -57 -18% -25 -7%
Authorisations 749 937 1,171 1,347 188 58% 234 63%
Software -392 -398 -437 -472 -6 -2% -39 -11%
Corporate -804 -606 -407 -339 198 61% 199 54%
2.26% 3.74% 4.18%  
8.00% 8.00% 8.00%  
12.5% 12.5% 12.5%  
-7.00% -7.00% -7.00%  
Changes to Story : 18/05/2022, Changes to Forecasts : 18/05/2022.