[Click eStock] "HectoFinancial Expands Overseas B2B Settlement Services... Expecting a Virtuous Cycle"

Sangsangin Securities analyzed on the 1st that Hecto Financial is expected to have a virtuous cycle structure due to the expansion of overseas business-to-business (B2B) settlement services. No investment opinion or target price was presented.

Hecto Financial is a specialized company in financial VAN-based virtual accounts, simple cash payments, and PG services. It has network connections with 21 domestic banks. Based on this, it is the market leader in virtual accounts and simple cash payment services in South Korea.

In the first quarter, Hecto Financial recorded sales of 37.1 billion KRW and operating profit of 4 billion KRW, representing increases of 2% and 40% respectively compared to the same period last year. Sojung Lee, a researcher at Hecto Financial, said, "This is due to the expansion of sales proportion of the relatively high-margin internal account payment service and the improvement of operating loss at the subsidiary Hecto Data," adding, "The noteworthy point is the expansion of overseas B2B settlement service partnerships."

He explained, "Hecto Financial provides settlement services on a cross-border platform through a foreign exchange license," and "It handles cost settlements (such as logistics and marketing expenses) and remittance of differences via the company's virtual accounts for overseas platforms without domestic accounts, as well as foreign currency sales exchange and settlement for domestic sellers."

He said, "In March this year, we signed an MOU for advance settlement with PingPong Payments, an Amazon PSP company," and explained, "This service settles 80% of sales proceeds to sellers within 24 hours, compared to the existing 2 to 4-week settlement cycle, and we expect to recognize revenue (financial income) by the end of the third quarter."

He evaluated, "Considering the high proportion of small and medium-sized enterprises among Amazon K-Beauty sellers, the total addressable market (TAM) is expected to expand significantly if the seller advance settlement service market is secured," and "Given that the domestic platform advance settlement companies charge a 2% fee, this is positive for future performance upside."

Synergy with subsidiary businesses is also expected. He emphasized, "The overseas B2B settlement service has been confirmed for introduction with eight global PSPs so far, and discussions are underway with more than ten companies," adding, "We expect a virtuous cycle structure through synergy effects such as the possibility of further expanding payment (PG, internal account payment, etc.) services using the sales lines secured through settlement services and the seller-targeted MyData business of the subsidiary Hecto Data."