MSCI is a high-quality compounder that has near monopoly position in the international index business. It benefits from
several secular tailwinds that will provide mid-teens earnings growth for the next decade. MSCI’s market position in ESG
research has potential upside as large as the passive investing trend we saw over the last 2 decades. While ESG makes
up just 6% of the business today and is overshadowed by a wonderful core index business, it is the fastest growing
segment that saw accelerated growth recently. Further, it should generate operating margins somewhere between that
of a ratings agency and an index provider (50 – 70+% margin). I believe the market undervalues the earnings power of
the MSCI due to ESG segment’s relative size and lower visibility as well as the company’s extremely long-term
reinvestment horizon.
Green Dot is a vertically integrated fintech/payment company mainly serving unbanked/underbanked population – people with limited access to the traditional banking system. It emulates traditional banking experience (cash deposit/withdrawal, digital payment, bank accounts) through a network of over 100,000 retail locations and digital banking. Its consumer business (59% of revenue, 93% of earnings, -8% y/y) pioneered the prepaid cards industry that allowed its core customers to participate in digital payment. As of FY19, Green Dot has 5 million active accounts (-5.6% y/y). Green Dot launched Banking-as-a-Service platform (39% of revenue, 7% of profit, +26% y/y) to grow 2B business, where GDOT becomes the back-end technology to help customers provide payroll, banking, and disbursement service to employees and/or customers. BaaS counts Apple, Uber, Intuit, and Walmart among its customers.
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