Paysafe traded as expected during Q117 and management maintains its guidance for FY17 revenue growth and EBITDA margins. Cash conversion remains strong with net debt reducing as expected. The stock continues to trade at a c 30% discount to its peer group on EV/EBITDA and P/E multiples, which in our view is excessive. Continued steady progress in growth and cash generation as well as a reduction in the relative contribution from the company’s largest merchant should help to reduce this discount.
Paysafe |
FY17 guidance maintained |
Q1 IMS |
Software & comp services |
9 May 2017 |
Share price performance
Business description
Analysts
Paysafe is a research client of Edison Investment Research Limited |
||||||||||||||||||||||||||||||
Paysafe traded as expected during Q117 and management maintains its guidance for FY17 revenue growth and EBITDA margins. Cash conversion remains strong with net debt reducing as expected. The stock continues to trade at a c 30% discount to its peer group on EV/EBITDA and P/E multiples, which in our view is excessive. Continued steady progress in growth and cash generation as well as a reduction in the relative contribution from the company's largest merchant should help to reduce this discount.
Year end |
Revenue ($m) |
EBITDA* |
EPS* |
DPS |
P/E |
EV/EBITDA |
12/16 |
1,000.3 |
300.8 |
42.1 |
0.0 |
14.2 |
10.5 |
12/17e |
1,103.9 |
332.5 |
44.6 |
0.0 |
13.4 |
9.5 |
12/18e |
1,203.0 |
364.8 |
48.6 |
0.0 |
12.3 |
8.7 |
12/19e |
1,298.1 |
398.9 |
52.7 |
0.0 |
11.4 |
7.9 |
Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Paysafe has provided a trading update prior to today’s AGM. Trading for the first quarter has been in line with management expectations and management reiterates its guidance for FY17: low double-digit organic revenue growth (our reported revenue growth forecast 10.4%, consensus 10.8%), with adjusted EBITDA margins of at least 30.1% (our forecast 30.1%, consensus 30.2%). Adjusted cash conversion remains strong; as a reminder adjusted cash conversion before payments working capital was 101% in FY16, and including payments working capital was 86%. The company spent £22.4m to buy back 5.8m shares during Q117; despite this net debt continues to reduce. We forecast that net debt (including deferred financing fees) will reduce from $279.8m at the end of FY16 to $91.8m by the end of FY17 before moving to a net cash position in FY18, with net debt/adjusted EBITDA falling from 0.9x to 0.3x over the course of 2017. This leaves substantial headroom to fund acquisitions.
|
Disclaimer
|
|
Disclaimer
|
Research: Investment Companies
Finsbury Growth & Income Trust (FGT) has been managed by Nick Train since 2000; he runs a concentrated portfolio of 25-30 primarily UK equities, aiming to generate growth in capital and income. Despite a period of underperformance in CY16, as result of the outperformance of cyclical companies where FGT has minimal exposure, its performance track record remains intact. It has outperformed its benchmark, the FTSE All-Share index, over one, three, five and 10 years. FGT has a progressive dividend policy and the 2016 annual dividend was increased by 8.3% versus the prior year. As a result of continued capital appreciation and investor demand, FGT’s assets under management now exceed £1bn.