Expanding its presence in Hungary, MoneyGram International Inc. (MGI) announced yesterday its partnership with Corner Cash Keszpenz Zrt to enhance its money transfer service business by adding its service to Corner Cash’s 11 locations across the country. Through this alliance, MoneyGram has added yet another country to its global network.
 
Money transfer business remains the driving force for MoneyGram and going forward, management projects a strong remittance market in Hungary. In 2008, Hungarians received an estimated $4.5 billion in remittances according to the World Bank, primarily from Germany, Romania, Ukraine, the Slovak Republic and the US.
 
Hence, the company is in the process of evolving advanced ways of consolidating in the region. Through the alliance with Corner Cash, MoneyGram will be able to support its regional strategy of constant improvement of the money transfer services in Hungary’s mid-sized cities including Budapest.
 
However, the global financial crisis has dampened the growth structure across the money transfer service industry and MoneyGram did not escape unscathed. The company’s operating earnings have been marred by several one-time charges and fixed overheads. Moreover, a weak demand growth in highly exposed markets such as Mexico and Spain adversely affects the average fees for money transfer services.
 
Nevertheless, MoneyGram continues to realign its investment portfolio, expand its market exposure globally and restructure its operations from time to time to adapt to the crisis period. However, the company has several issues to deal with in the near term, such as cost-cutting initiatives, debt-repayment strategy, utilization plans for cash and equivalents and for generating sufficient cash flow for its operations. Unless these concerns are addressed, the company may continue to generate loss in its business. Hence, we recommend a Neutral stance on the stock.
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