MGI Renews Vietcombank Contract

Moneygram International Inc. (MGI - Analyst Report), has renewed its contract with leading Vietnam-based bank, Vietcombank. Following the news, the company’s shares rose 0.8% (or 13 cents) to close at $16.45 yesterday.

Per the renewed contract, the people of Vietnam will now be able to send and receive funds, contrary to the earlier contract which only permitted receiving money. These services will be available across 400 outlets of Vietcombank.

As per the estimates of the World Bank, roughly $9.2 billion was remitted to Vietnam in 2011. Vietnam has one of the highest remittances primarily because a majority of its population, which lives, studies, travels and works abroad, needs to send and receive money to and from their families.

This follows MoneyGram’s recent agreement with Banco Ganadero to make its money transfer services available across 600 locations in Bolivia. Also, earlier this month, MoneyGram renewed its contract with Advance America, a financial service provider and a unit of leading Mexican bank, Grupo Elektra SA, for the next five years. Of late, the company has been renewing several contracts with the clear intention of augmenting its core products.

MoneyGram reported second-quarter 2012 earnings per share of 23 cents, in line with the Zacks Consensus Estimate. Higher money transfer transaction volumes and higher fee and other revenues drove the top line, while absence of preferred dividend payouts, lower interest expenses helped the bottom line and margin expansion in the quarter.

MoneyGram’s closest competitor, Western Union Co. (WU - Analyst Report), also shares the company’s aggressive stance towards expanding its services both organically and inorganically. Both companies hold a short-term Zacks #3 Rank (Hold). We also have a long-term Neutral recommendation on the shares of both MoneyGram and Western Union.