Tuesday, April 17, 2018

PAX Global Technology Getting Minimal Benefit Of The Doubt

Since my last write-up on PAX Global (OTCPK:PXGYF) (0327.HK) in January of this year, the shares have more or less marked time, though there was a nice run heading into fourth quarter earnings in March that ultimately faded away. Relatively speaking, though, that's not such a bad performance in what has been a tough payments technology space - while Square (SQ) has done very well so far this year, Ingenico (OTCPK:INGIY) has had a tough run (down 20%) and VeriFone (PAY), too, was drifting lower before receiving a buyout bid.

The shares remain a challenging call. While PAX is doing quite well in Brazil and surprisingly well in Europe, I do have concerns that there are long-term fundamental shifts in the market working against PAX, exacerbating its lack of a value-added service business. Likewise, the company's home market (China) remains quite difficult, and management has trading gross margin for market share across multiple geographies. If PAX management can stabilize the business and report a few clean quarters, though, I believe there's enough underlying fundamental value here to merit a closer look from more aggressive investors.

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PAX Global Technology Getting Minimal Benefit Of The Doubt

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