MyBucks — Business restructuring in progress

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Research: Financials

MyBucks — Business restructuring in progress

MyBucks (MBC) recently announced the successful completion of its debt recapitalisation process, restoring a positive equity position at the holding level (c €18m pro forma). This was accompanied by a number of operational improvement measures and the disposal of selected businesses and assets. As most of the above initiatives (including the debt recapitalisation) were concluded post reporting date, they are not reflected in MBC’s FY19 results. MyBucks will now focus solely on developing its banking operations in five African countries and the lending business in Botswana.

Milosz Papst

Written by

Milosz Papst

Director, Financials



Business restructuring in progress


Scale research report - Update

3 January 2020



Market cap


Share price graph

Share details




Deutsche Börse Scale

Shares in issue


Total assets as at 30 June 2019


Business description

MyBucks is a Luxembourg fintech company listed in Frankfurt. It provides unsecured loans, banking solutions and insurance to customers and SMEs in six African countries. It uses AI technology to assess creditworthiness and is fully integrated with local banking systems.


Large target market, with mobile and internet penetration well ahead of traditional banking.

Expanding banking business.

Proprietary AI and integration with local government and banking systems.


Distressed financing situation.

Competition from traditional microfinance institutes and banks.

Sub-Saharan Africa is arguably at higher risk from financial and political shocks than more developed markets.


Milosz Papst

+44 (0) 20 3077 5700

MyBucks (MBC) recently announced the successful completion of its debt recapitalisation process, restoring a positive equity position at the holding level (c €18m pro forma). This was accompanied by a number of operational improvement measures and the disposal of selected businesses and assets. As most of the above initiatives (including the debt recapitalisation) were concluded post reporting date, they are not reflected in MBC’s FY19 results. MyBucks will now focus solely on developing its banking operations in five African countries and the lending business in Botswana.

FY19 losses amid group restructuring

MBC incurred a significant net loss in FY19 of €36.1m (including discontinued operations) vs a loss of €8.2m in FY18. This was due to a number of factors, including a high burden from expensive (mezzanine) debt, elevated holding-level expenses and the impact of natural disasters and macroeconomic challenges in selected end-markets. This resulted in negative equity of €41.8m at the holding level. MBC’s loan book was €83.3m vs €85.7m at end-June 2018, due to the ongoing repositioning of the business. While the portfolio’s credit quality deteriorated during the year, management is confident it will improve over the next 12 months.

Focus on selected banking businesses

After streamlining the business through a number of disposals (see page 3), MBC currently runs five banking operations in Mozambique, Malawi, Uganda, Zambia and Zimbabwe, as well as a lending business in Botswana, which it plans to convert into a commercial banking business. We believe that MBC’s focus in the short term should be on retaining a positive equity position and completing further capital measures (including a capital increase structured as a rights offering in Q220).

Valuation: Affected by restructuring

MBC’s recent business reorganisation, coupled with a challenging liquidity situation, means a peer group comparison is difficult. After accounting for the higher share count and pro forma equity following the recapitalisation measures as estimated by the company, MBC’s shares currently trade at a P/BV of 3.6x.

Historical data




































Source: MyBucks accounts. Note: *Net interest, fee and commission income. **From continuing operations.

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

Financials: Heavy losses and business reorganisation

MBC reported a loss from continued operations of €25.8m for FY19 (to 30 June 2019) vs a loss of €4.3m in FY18, with operations now classified as discontinued (including the South African business, GetBucks Zambia and GetBucks Malawi) generating a loss of €10.3m (€3.8m loss in FY18). The loss illustrates the multiple challenges the company has faced, including a high burden from expensive debt, operational inefficiencies (including inflated overhead costs), as well as some market headwinds (eg in Zimbabwe and Mozambique). Net operating income declined to €12.8m in FY19 vs €21.0m in FY18, reflecting the €9.8m of impairment charges booked in the lending segment (€9.1m after intersegmental eliminations), of which €6.5m was linked to an impairment of related-party facilities in South Africa. In this context, we note the management change conducted during the period, as discussed later in the note.

Meanwhile, net operating income in MBC’s banking business rose to €29.2m vs €20.6m in FY18 following an increase in net interest income to €18.8m vs €14.6m in FY18. This was partly a function of the full consolidation of MBC Malawi (formerly New Finance Bank) following the acquisition of the remaining 50% stake in January 2019. That said, MBC estimates that the quality of the pro forma loan book of the six remaining entities following the group’s reorganisation (ie the banking businesses in Malawi, Mozambique, Uganda, Zambia and Zimbabwe and the lending business in Botswana), as measured by expected credit losses (ECL), deteriorated to 9.4% at end-June 2019 vs 7.6% at end-June 2018. This was due to 1) impairments in Mozambique due to cyclones in March and April 2019 that affected MBC’s agricultural loan book; 2) aggressive payroll lending expansion in Mozambique; and 3) short-term unsecured lending in Zambia outside of the normal approval procedures. MBC states that it has addressed these issues and expects the loan quality to improve in the next 12 months.

MBC’s loan book at end-June 2019 declined slightly to €83.3m vs €85.7m at end-June 2018 (though we note it was €111m at end-December 2018). This reflects the group’s reorganisation, including the deconsolidation of the Uganda and Zambia operations, as well as the reclassification of its Australian operations to ‘available for sale’. Moreover, the loan book value was negatively influenced by the devaluation of the Zimbabwean currency. This also resulted in a €15.8m foreign exchange loss, which was reflected directly in equity, ie it was not included in net profit for the period.

Exhibit 1: Results summary




y-o-y % change

Interest income




Interest expense




Net interest income




Net fee and commission income




Net operating income




Employee costs




Depreciation, amortisation and non-financial instrument impairments




Professional fees




Other operating expenses




Loss before taxation




Taxation charge




Loss from continued operations




Discontinued operations




Loss for the year




Source: MyBucks accounts

Implementing several improvement measures

As a result of considerable losses in FY19, MBC’s equity was a negative €41.8m at the holding level as of end-June 2019 vs a negative €2.3m at end-December 2018. However, after the reporting date (in November 2019), the company completed a €63.9m debt recapitalisation, which was initiated in March 2019 (see our March flash note for details). This included agreements to convert €49.1m of debt into equity at par (€1 per share), as well as the acquisition of additional assets through issuance of €10.3m shares at €1 per share. Moreover, MBC settled the €4.5m expenses related to the transaction in equity. According to MBC, its equity at the holding level would return to a positive €17.6m at end-June 2019 on a pro forma basis, if it received regulatory approvals for the €63.9m recapitalisation by end-June 2019. MBC estimates that the net holding debt post the recapitalisation was €39m at an annual cost of €7m. At the same time, its share count increased to 76.6m vs 12.7m at end-December 2018. We understand that MHMK Group (directly and through its subsidiary, Ecsponent, a listed African financial services group, together with related parties) has become MBC’s majority shareholder (we estimate its stake at c 61%).

It is important to note that the recapitalisation is entirely non-cash and thus does not resolve MBC’s future funding needs given that the company still generates negative operating cash flow (negative €27.2m in FY19 vs negative €25.1m in FY18, while cash and cash equivalents were €10.3m at end FY19). That said, we note that MBC has generated some cash proceeds from business/asset disposals, including c €10m from the disposal of an office building in Pretoria, South Africa. Moreover, MBC intends to complete a capital increase in Q220, structured as a rights offering, with five shares offered for every share held by current shareholders. MBC targets €30m of gross proceeds. The rights offering would help compensate shareholders for the strong dilutive impact of the debt recapitalisation. MBC also highlights that it is in discussions with additional shareholders to conduct further debt conversions and capital increases. In parallel, the company has launched operational restructuring measures, which it states will translate into annual cost savings of c €5m. They include, among others, a reduction in headcount at the holding level to less than 10 from over 100.

Strategic focus on banking operations

Simultaneously to the March 2019 recapitalisation announcement, Dave van Niekerk agreed to retire from the CEO position and was replaced by Timothy Nuy, MBC’s former CEO, and Riaan Paul was appointed CFO. The new management has decided to facilitate MBC’s long-term strategy to become a leading African digital banking group by selling its lending and non-core operations in recent months. MBC highlights that there was no opportunity in these markets to upgrade to a deposit-taking licence.

MBC disposed of its lending business in South Africa along with its subsidiaries in Swaziland and Namibia post the period end. The decision was driven by regulatory concerns over a loop structure, which arises when a South African investor holds more than 40% in a foreign entity that invests in South Africa. This was the case after Ecsponent (incorporated in South Africa) increased its shareholding in MBC to over 40%. Moreover, MBC sold its business in Kenya, together with its subsidiary in Tanzania. The company disposed of the above South and East Africa operations for €11.9m to Finclusion (an entity that is a related party to one of MBC’s directors). As part of the transaction, MBC granted a debt facility to Finclusion in order to facilitate the execution of the transactions and avoid delays in the debt to equity conversion process.

In addition, in September 2019, MBC sold its 60% stake in its Australian operations, Fair Go, for €5m to Skybound. MBC has also granted Skybound an option to acquire its remaining c 25% stake in Fair Go for €2.1m, exercisable by 31 December 2019. If Skybound does not exercise its right to purchase, the shares will be sold to Finclusion at the same price. Finally, MBC divested its 100% stake in GetBucks Poland to Omnio for an undisclosed amount in October 2019 and entered into a service agreement with the company.

Following the above transactions, MBC now runs banking operations in five African markets: Mozambique (28% of the loan book at end-June 2019 on a pro forma basis for the six remaining markets, as per MBC’s estimates), Malawi (23%), Uganda (23%), Zambia (9%) and Zimbabwe (4%). It also intends to migrate its existing lending business in Botswana (14%) to commercial banking. MBC’s focus remains on banking operations, which it continues to leverage with its proprietary and outsourced digital technology. The company’s aspiration is to be one of the top five players in its existing banking markets in terms of retail market share by 2024. Below, we have listed major developments in these markets.

In January 2019, MBC increased its stake in NFB in Malawi to 100% by acquiring the remaining 50% of shares in this entity. It is worth highlighting that MBC will have to dispose of at least 35% of NFB’s shares by 31 December 2021 due to regulatory requirements. In addition, MBC’s subsidiary in Malawi agreed to acquire a 100% stake in Nedbank Malawi for an undisclosed amount in December 2019. Nedbank has 11 branches in the country and serves c 42k customers. MBC estimates its deposit market share in Malawi will increase to 5.8% from 3.2% at end-June 2019 following the transaction (which is subject to regulatory approvals and expected to close in Q120). In Uganda, MBC has upgraded its banking licence from Tier 2 to Tier 1, which means it can now run transactional and checking accounts. Finally, MBC launched banking operations in Zambia in April 2019, where it gathered €4.4m deposits and a loan book of €7m until end-June 2019.

However, we acknowledge there are certain economic challenges in Zimbabwe, which represented c 40% of MBC’s post-tax profit in the banking segment in FY19. The Zimbabwean currency has depreciated by c 16.5x since the February 2019 currency reform to mid-September 2019. The country has experienced hyperinflation in recent months, with year-on-year inflation of almost 300% in August 2019 and 161% in October 2019, as per IMF data. Management believes its business in the country has solid fundamentals and will resist these economic headwinds.

In June 2019, MBC downgraded its banking licence in Mozambique to a deposit-taking licence as it did not meet the minimum capital requirements set by the local central bank. Management asserts the downgrade does not affect the group’s business operations in this country. We also note that the Bank of Mozambique imposed sanctions on MBC due to violations of the Anti-Money Laundering and Anti-Terrorist Financing Act as announced in October 2019.

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