TRG fundamental analysis

TRG Pakistan Limited (TRG), through its associate TRG International, holds significant stakes in two key companies in the customer experience (CX) industry: Afiniti and IBEX. TRG has a 17% stake in Afiniti and a 30% stake in IBEX. Additionally, TRG holds liquid assets including USD 30 million in cash and approximately 155 million shares of TRG through a special purpose vehicle (SPV).

Financial performance for 9MFY24

During the first nine months of the fiscal year 2024 (9MFY24), TRG reported a loss after tax of PKR 16.7 billion. The investment value of TRG International (TRGI) was recorded at PKR 56.8 billion as of March 2024.

Overview of TRG’s assets in the CX industry

IBEX: CX outsourcing

IBEX is a global provider of outsourced customer interaction solutions, operating in 34 locations with over 32,000 employees, including 7,000 in Pakistan. IBEX was listed on NASDAQ in August 2020. As of June 24, 2024, IBEX had a market capitalization of USD 280 million, with TRG’s stake valued at approximately USD 88 million.

Financial performance and projections

• Expected revenue for FY24: USD 506 million (down 3% YoY)
• Expected adjusted EBITDA for FY24: USD 66 million
• Expected EPS for FY24: USD 2.05

IBEX experienced solid growth until 2023 but has seen a slowdown in the last 12 months due to industry headwinds. The company is also evaluating the impact of generative AI on its operations and investing in virtual agent solutions.

Afiniti: CX agent optimization

Afiniti specializes in predictive AI-driven behavioral pairing technology targeting enterprise clients. The company is expanding its product offerings with new solutions like Mega, Airo, and Minerva (customized virtual agents). Afiniti has a global client base of 100 and employs 1,500 people, with 1,000 based in Pakistan.

Financial performance and challenges

• Revenues in FY23: USD 266 million
• Expected revenue for FY24: Lower due to volatility from top-2 clients

Despite strong EBITDA generation, Afiniti faces a significant debt load of over USD 500 million. The management is in discussions with lenders to reduce interest expenses and extend debt maturities.

Industry challenges and valuation trends

The global macro tightening since mid-2022 has compressed tech sector valuations, leading to a 50% drop in private company SaaS valuations. The overall CX industry volumes have declined year-over-year due to the rise in generative AI. Sector valuations have significantly dropped from their peak, currently ranging from P/E 5-9x compared to P/E 14-16x in June 2022.

Conclusion

TRG Pakistan Limited continues to navigate through financial challenges and industry headwinds, leveraging its stakes in Afiniti and IBEX. The company remains focused on optimizing its assets and exploring new opportunities in the evolving CX industry.

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Disclaimer:

The information in this article is based on research by Taurus Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.