Financial Technology

Is Starbox Group Holdings Ltd. IPO a Good Buy? • Benzinga

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Starbox Group Hldgs (NASDAQ:STBX)


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Key Takeaways:

  • Starbox Group delivers a wide-ranging fintech business targeting small-to-medium-sized businesses.
  • The company brings a profitable business and a relevant, compelling service to the IPO table.
  • Still, prospective investors must watch for vulnerabilities as global economic pressures weigh on sentiment.

Based in Kuala Lumpur, Malaysia, Starbox Group Holdings Ltd. aims to liven up the market for new public listings, delivering a profitable business tied to the burgeoning financial technology (fintech) industry. Specifically, Starbox offers a cash rebate, digital advertising and payment solution business ecosystem for small-to-medium-sized businesses. As well, the company’s initial focus on the Southeast Asian market possibly presents an exciting growth narrative.

At a glance, Starbox Group’s main point of attraction is its functional, profitable business. While market sentiment for the initial public offering (IPO) – or the first time a private enterprise distributes its equity shares to retail investors – has improved significantly since earlier this year, many if not most of the new listings comprised of small issuers.

While Starbox isn’t the biggest company to launch an IPO this year, it features a market capitalization of $203 million. As well, in its fiscal year 2021, the company generated revenue of $3.17 million and net income of $1.45 million.

On the fundamental aspects impacting Starbox, the broader fintech space represents one of the most compelling opportunities for startup enterprises. According to The Brainy Insights, the global fintech market may command a valuation of more than $936 billion by 2030. In addition, Reuters reports that the Southeast Asian internet economy could be worth $1 trillion by 2030.

On the other end of the scale, Starbox may incur significant headwinds related to its digital advertising business. During recessionary cycles, Harvard Business Review points out that many companies reduce spending, with marketing-related functions often unfavorably standing out.

Moreover, Starbox is not immune to wider fundamental pain points. Specifically, Malaysia suffered a 5.7% loss of economic activity, followed by a patchy recovery of 3.1% in 2021. While the World Bank projects a 5.5% expansion in 2022, many concerns remain, particularly a slowdown in China and geopolitical spillovers from Russia’s invasion of Ukraine.

Below are the key pros and cons to consider before you participate in the Starbox IPO.

What Does Starbox Group Do?

Founded in 2019, Starbox Group is a fintech specialist, specifically building a digitalization-driven ecosystem targeting micro, small and medium enterprises in Malaysia. Primarily undergirding the Starbox business is its cash rebate network. The company operates the GETBATS website, which is billed as the “No. 1 Instant Rebates Online Shopping Platform in Malaysia.” As of March 31, 2022, GETBATS featured approximately 614,000 members and nearly 800 merchants.

Secondarily, Starbox runs a digital advertising business, geared toward smaller companies that lack the bandwidth to develop an in-house data management system for effective marketing, according to management’s prospectus. The payment solutions component represents the newest business segment for Starbox, which was established in May 2021. This segment focuses on payment solution services for merchants.

According to Starbox’s Form F-1 Registration Statement with the U.S. Securities and Exchange Commission (SEC) – the F-1 being the foreign-listed equivalent of the Form S-1 – the company features four competitive strengths, listed below.

  • A business ecosystem comprising cash rebate, digital advertising and payment solution services.
  • Capable of providing targeted digital advertising services by leveraging business data analysis technology.
  • Leveraging a solid advertiser base spanning a wide range of industries.
  • A visionary and experienced management team with strong technical and operational expertise.

Moving forward, the company features these growth strategies.

  • Expand its business scale and secure new advertisers.
  • Grow its merchant and member bases on the GETBATS website and mobile app.
  • Continue to invest in and develop technologies relating to data analysis.
  • Expand its cash rebate and digital advertising services internationally.

Finally, Starbox’s F-1 document lists several risk factors that prospective investors should consider before participating in its IPO. Principally, management disclosed arguably the biggest risk factor as follows: “if advertisers stop purchasing digital advertising services from us or decrease the amount they are willing to spend on marketing campaigns and promotional activities, or if we are unable to establish and maintain new relationships with advertisers, our business, financial condition and results of operations could be materially adversely affected.”

When is the Starbox Group IPO Date?

Barring any unusual circumstances, Starbox Group is scheduled to price its new listing on Aug. 23, 2022. One day later, it will ink its name on the IPO calendar. Shares will trade on the Nasdaq exchange under the ticker symbol STBX. Originally, Starbox filed its IPO intentions confidentially on March 22, 2022. Network 1 Financial Group Inc. (OTCMKTS: NTFL) is the sole bookrunner on the deal.

According to the terms of the new listing, Starbox plans to raise $23 million through the distribution of 5 million shares. The estimated price spectrum ranges from $4 to $5. As mentioned earlier, at the midrange, the fintech firm will command a market value of $203 million.

Among the most conspicuous factors distinguishing STBX stock from other new listings is the established value of the enterprise. While Starbox technically classifies as one of the small-cap stocks, its capitalization dwarfs that of recent IPOs. Unfortunately, a combination of Russia’s shocking decision to invade Ukraine, along with economic pressures – mainly stemming from multi-decade highs in inflation – have hurt sentiment, both on the issuing and investing side.

Looking beyond the horizon, Starbox’s inherent ties to the Malaysian market may benefit STBX stock. The World Bank notes that the “economy is projected to expand 5.5 percent in 2022, driven mainly by a strong rebound in consumption.” In addition, “Malaysia’s labor market is improving, with the unemployment rate decreasing from 4.3 percent in Q4 2021 to 4.1 percent in Q1 2022.”

On the flip side, the World Bank warns that an “unpredictable global environment contributes to significant downside risks.” Plus, investors must watch out for “slowing activity in China impacting the rest of the region,” which could have negative spillover effects for STBX stock.

What Analysts are Saying About Starbox Group IPO

According to Corey Mann, Investment U content manager and a journalist whose work has been featured on The Virginian-Pilot, The Washington Post, CNN and MSNBC, Starbox’s GETBATS platform could help draw intrigue to the company’s upcoming new listing.

“Specifically, a cash rebate is money refunded to a customer who buys products from a retailer within a specific time frame. And rebates are put in place for dealers to clear out inventory without having to cut prices substantially. And online shopping is dominating markets around the world. This is why the STBX IPO has become an intriguing opportunity for investors,” Mann said.

Mann explained that “as of 2021, the GETBATS website and mobile application had more than 500,000 members and 700 merchants. These numbers continue to grow and STBX stock will likely benefit in the future.”

In addition, Mann emphasized the financial viability of the business. “In the last 12 months, StarBox has generated $3.2 million in revenue and $1.5 million in net income. Moreover, the company has a market cap of $202.5 million.”

However, analysts from Renaissance Capital pointed out that while the “company is profitable,” its “revenue stream has been highly unstable.” In addition, they mentioned that a Malaysia-focused payments app, Treasure Global Inc. (NASDAQ: TGL), went public earlier in August. While TGL shares are up 42% from its initial offering price of $4, they’re down 68% from its first public close ($17.82).

In other words, those who speculate on STBX stock in the open market can get burned badly. At the same time, acquiring shares on a pre-IPO basis offers no guarantees of upside success.

Starbox Group Financial History

Starbox, in the fiscal year ended Sept. 30, 2021, generated revenue of $3.17 million and net income of $1.45 million. These figures represented a favorable profile against the year-ago results of sales of $153,863 and a net loss of $205,154.

On the balance sheet, Starbox features total assets of $4.02 million against total liabilities of $2.75 million.

For the six months ended March 31, 2022, the company posted sales of $2.92 million and net income of $1.26 million.

Starbox Group Potential

As management disclosed in its IPO prospectus, Starbox intends to concentrate on its home Malaysian market, then expand out to the Philippines, Thailand and Indonesia. It may be a wise and lucrative strategy. According to a Reuters report, the Southeast Asian internet economy could reach a valuation of $1 trillion. As tens of millions of people embrace e-commerce and food-delivery services, the boost in familiarity can drive a substantive digital ecosystem.

At the same time, CNN Business warns that the “online ad market is in decline.” Worse yet, the pessimism is dragging down some of the biggest technology giants, posing concerns about Starbox’s revenue channel viability.

Where to Buy Starbox Group IPO Stock

If you want to participate in Starbox Group’s IPO, you’ll need to know how to buy stocks. But before you take that step, you must sign up for a brokerage account. Below is a list of the best brokers to consider.

STBX Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

STBX Pre-IPO

Those seeking pre-IPO opportunities in STBX stock (that is, acquiring shares at their initial offering price as opposed to whatever the open market decides) can do so by opening an account with ClickIPO.com.

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