Brick-and-mortar businesses are slowly witnessing a resumption of footfall with the increasing number of vaccinations and the gradual recovery of the small and medium-sized business sector. Fintech player The OLB Group Inc. (OLB, Financial), which has been supporting many such smaller merchants, had a slow 2020 on the financial front, but has made some valuable additions to its offerings.
The company is in the process of implementing artificial intelligence-based analytical tools for smaller merchants to cater to their issues of data deficit and gaps in data collection. The company's new offerings, coupled with increasing e-commerce activity, are expected to act as catalysts in the growth of OLB Group in 2021.
Artificial intelligence-based analytics for merchants
OLB Group recently announced its plan to implement AI and machine learning analytics onto its platform, which will allow merchants to access and respond to changing customer behaviors and preferences. The enhanced analytics features will work as an extension to the ShopFast merchant dashboard, a point-of-sale solution within OLB's OmniSoft cloud-based business management platform. It is worth highlighting that the pandemic brought a series of operational disruptions and business volatility that has challenged the ability of small and mid-sized merchants to serve customers reliably and engage their resources authentically. These new features are expected to offer data-driven insights into customer buying and browsing patterns, inventory and business processes as well as predictive analysis regarding consumer responses.
Moreover, in an environment where larger organizations are increasingly able to provide personalized experiences to their customers, management at OLB Group is inclined to empower small and medium-sized merchants to have access to solutions to better understand their customers in a cost-effective way. The new analytics features are expected to be available to all ShopFast merchants at no additional cost starting in the third quarter. This could act as an excellent opportunity for OLB's management to aggressively market ShopFast and increase its merchant base as well as its revenue.
Other key developments
Earlier this month, the company announced its plan to provide a broad set of merchant services solutions to three Class D minor league baseball teams operated by National Sports Services. The technology will be used by the Lafayette Aviators, Johnstown Mill Rats and The Spartanburgers, a team located in Spartanburg, South Carolina. The participating teams will be able to configure the solution to manage their specific operating needs and incorporate the platform's data analytics into specific promotional and marketing campaigns.
Apart from this, OLB Group also provided its customers an additional contactless payment option at the point of sale using traction-specific QR codes. The merchants utilizing these services can select acceptable funding sources, including Apple Pay and Google Pay, multiple cryptocurrency wallets and other digital payment applications. It is worth noting that in this pandemic-driven environment, contactless transactions have become increasingly popular. As such, OLB is on track to provide a cost-effective vehicle to merchants so they can enable encrypted and secured payment solutions.
In addition, the company facilitates contactless near-field communication transactions in order to utilize NFC-enabled cards and mobile devices at point-of-sale terminals equipped with NFC readers. Lastly, the company launched a service that helps merchants process cryptocurrency purchases in an effort to speed the transaction process on par with credit and debit processes. As a result, OLB Group appears to be well-equipped to thrive in this space over the long term.
Valuation
Illustrated in the above chart is a comparative analysis of the enterprise value-to-revenue multiple of the thinly traded stock, OLB Group, with its larger peers, Shopify Inc. (SHOP, Financial) and Square Inc. (SQ, Financial). OLB is trading at a multiple of 3.64, which is well below its industry peers. The increased awareness about the company and its potential could lead to a rise in the trading volume and eventually to significant multiple expansion.
We see the same story in the price-book ratio comparison as well. Square and Shopify are trading at price-book ratios of 41.91 and 21.04, while OLB Group, despite having the same payment model, is trading significantly lower at 5.29. Obviously, it is unfair to expect OLB to garner a multiple above 20, but there is definite scope for improved market perception through better management communication. Interestingly, the company's management is making immense efforts in strengthening the balance sheet, which is evident with the recent payoff of its $7.7 million acquisition-related senior term loan originated in April 2018. This will lead to savings of $0.72 million in interest annually and reduces the capital gearing of the company.
As the overall economy has improved and businesses have reopened, the company has witnessed a month-over-month increase in the number of transactions in the recent quarter. The robust trends seen in e-commerce sales during the previous holiday season acted as a huge positive for OLB Group as well. To sum up, I believe the company's current share price of around $5.17 does not factor in the growth opportunities ahead, which is why the stock could be a highly attractive investment proposition.
Disclosure: No positions.
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