Moneygram International: Case study of a fund transfer company

Acepublisher .

Order the writing of a tailor-made Finance Term papers

Free quote online

Thesis Format .doc

Moneygram International: Case study of a fund transfer company

Download

Read an extract

Reader
Abstract
Contents
Extract

Abstract

Moneygram Company was founded in 1940. Initially, the company was named Traveler's Express Company.
In 1998, it acquired Moneygram Payment systems Inc (a company specialized in transfers of money) and then changed its name to Money gram International Inc in 2003. This acquisition was probably the most significant in the company's history but definitely not the only one. The growth strategy relies on external growth in addition to organic growth meaning that the company expands its activities mostly through acquisitions. Other important acquisitions the company made include ACH Commerce in April 2005 (an automated clearing house payment processor) and Money Express SrL in 2006 (an Italian financial services company).All these operations enabled the company to grow rapidly and become one of the leading actors in the field of financial services. The company's services are provided through a network of financial agents located all around the world. However, the current focus of the company is to expand its activities in Europe, it had to review its distribution model in order to comply with European financial and legal regulation (for instance, a 2005 European directive on financial services requires any operator in this sector to take some measures in terms of management, cash-flows…). It therefore relies on locally owned retail stores in Europe to distribute its products, in addition to their traditional agent model.

Presentation of the company
1. Introduction: An overview of the company's activity
2. Marketing portfolio
3. Movements of money
4. The team
5. Marketing and brand strategy
Financial analysis
1. 'Intangible' factors that have an impact on the stock price
2. Money gram management team
3. Income statement
4. Balance sheet
5. Main ratios
Conclusion

Get this table of contents for free after login.

Extract

[...] It is the amount of money that the company has at the end of the year (in case of an annual statement), as a result of the activity of that same year, should the company spend less money that it earns. Otherwise (in the case of Moneygram), the Net Income Earnings Before Taxes Taxes) will be negative, simply meaning that the company did not manage to cover all its yearly costs with its sales and therefore had to either borrow money or use money from previous net incomes to face its liabilities. [...]

[...] Moneygram is the leading issuer of money orders in US, with more than 246 million dollars of the segment losses are allocable to the money order sub-segment. c. Bill payment services These are services provided to customers for urgent payments. Moneygram negotiates partnerships with companies so that the customers can pay their invoices through such network of agents Payment Services In this segment, the company's customers are financial institutions. Moneygram sells payment processing services to these institutions. This activity accounts for 80% of the company's total losses in 2007, with 920 million dollars operating losses. [...]

[...] There is no data for Moneygram but we can see that the usual value is around 14, which means that investors expect high earning growth, but still less than the average of the companies included under the S&P 500. The higher the PER, the higher the market values the company's expected earnings flow. Usually the PER is not made by comparison with the previous years since the investor may want to compare it with its forecast rather than last years earnings since it is not significant for an investor who bought a stock this year. [...]

[...] First, the fact that it had to recapitalize and accept the entry of two investment funds in its capital led it to review its development plans. The new stockowners have requested a high level of dividend which will definitely lead to a slow down in the growth perspectives of the company. Second, Moneygram is also facing more and more judicial concerns which can be very dangerous in this kind of activity as financial loans depend on the level of trust the company has from the financial markets as well as the ratings made by [...]

[...] For instance, in the case of transfer activity, as long as the money transferred is not used by the recipient, Moneygram can invest the money. The company has made an important strategic mistake by investing on very illiquid and risky assets. Moneygram has a price comparative advantage to Western Union. It is likely that it wanted to compensate this price difference, since it could not have a bigger volume, by investing money on financial funds supposed to be very lucrative. [...]

doc