Shinhan Investment Corp on May 7 initiated coverage of Hecto Financial, saying attention is needed on advances in its settlement infrastructure and the expansion of new payment rails. It set a buy rating and a target price of 53,000 won.

In a report, senior researcher Kim Yu-min (김유민) and research fellow Choi Seung-hwan (최승환) at Shinhan Investment Corp assessed that Hecto Financial is expanding beyond a simple electronic payment gateway (PG) operator into a global money-flow infrastructure company.

They analysed that the company has entered a phase of structural growth through a shift to a fee-based revenue model as the share of its “My Account Payment” increases, growth in cross-border settlement and securing stablecoin payment rails.

They also viewed the potential for profitability improvement positively. They explained that a higher share of high-margin “My Account Payment” and cross-border settlement is replacing part of the low-margin PG business, shifting to a structure in which profit growth becomes more sensitive even with growth in the same transaction amount.

They cited infrastructure capable of handling payment, settlement and remittance as the core of competitiveness in its stablecoin business.

The researchers assessed that while general PG operators are focused on payment functions, Hecto Financial can directly carry out fund transfers and settlement based on a payment transfer network connected to 23 banks. They added it is also participating in Circle's CPN (Circle Payments Network) and is establishing itself as a key partner within a global stablecoin payment network.

They added it has secured a virtually unique position in South Korea.

They forecast that a stablecoin-based payment structure will also have a positive effect on profitability, and said the company is likely to have a high chance of driving margin improvement and a valuation re-rating through future expansion into foreigner payments, trade remittances and web3 payments.

The researchers said they reflected the scarcity of a settlement infrastructure based on its payment transfer network and the option value of a CPN-linked payment network that is the only one of its level in South Korea. They assessed it is in a phase that holds both stable growth in its core business and new growth engines at the same time.