Moneygram International Inc.(MGI) announced the addition of 30 countries to its direct-to-account or cash-to-account services, which will facilitate transfer of funds to Philippines that was previously restricted to the U.S. alone. Out of the participating banks, 20 are located in Philippines.
The service will enable customers to send money from across 30 countries to Philippines. This news follows the report published by the World Bank, which states that Philippines is the fourth-largest country to receive remittances from around the world.
According to World Bank’s estimate, an amount of $23 billion was remitted to the country in 2011. Philippines has one of the highest remittances primarily because majority of its population live and work abroad and need to send money back to their families in their country.
On a separate development, the company introduced MoneyGram xpress in order to extend its relationships with Speedway LLC, benefiting 1,460 chain stores across the seven states in the Midwest. The service will allow customers to avail various services like purchase in-lane, a pre-paid money transfer package at a predefined dollar price.
Being the second largest provider of international remittances, MoneyGram is well positioned to grow in the near term. We believe all of the above initiatives undertaken by the company will support its top-line growth and help the company achieve its 2012 guidance of 7–9% revenue increase.
The steady increase in the company’s share prices since the beginning of June is backed by its positive expansion efforts. This also reflects investors’ confidence in the operational efficiency of the company. The stock has gained about 9.2% during that period.
The competitors of MoneyGram are equally proactive on the expansion front. Its closest competitor Western Union Co. (WU) is on an aggressive expansion spree. Recently, it announced an agreement with Veridian Credit Union to serve its members with global money transfer facilities. It also signed an agreement with Michigan-based Citizens Bank to provide its global remittance service to Citizens Bank customers via 219 of its branches across Ohio, Michigan and Wisconsin.
MoneyGram currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on its shares.
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