Seeking Alpha: PAX Global Technology Looking To Swipe U.S. Market Share

PAX Global Technology (0327.HK) (OTC:PXGYF) ("PAX") has had a rough go of it since May of 2015 when I last wrote about the company. While the company has more or less kept to its plan of driving growth in China and emerging markets like Brazil and prepping for a major entry into the U.S., the stock has been hit by worries about those emerging markets, weakness in Chinese/Hong Kong stocks in general, and some company-specific competitive and performance worries.

By no means is this a safe stock, but I believe it is an undervalued growth opportunity that is going to start seeing meaningful growth in the large U.S. point of sale (or POS) terminal market in 2016. While I don't think PAX will unseat VeriFone (NYSE:PAY) or Ingenico (OTCPK:INGIY) in the U.S. or Western Europe, I believe the company has established a strong beachhead in faster-growing markets like Brazil and China. These shares seem to react to every hint of news about competitive product introductions, but I believe the shares are more than 25% undervalued on the basis of long-term high-teens annualized FCF growth.

While there is an ADR listing in the U.S., the volume is pretty much non-existent. Many of the better brokers now handle international trades (and at reasonable commissions), and I would strongly recommend going with the Hong Kong shares if that is an option.

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PAX Global Technology Looking To Swipe U.S. Market Share

Seeking Alpha: Has A Window Opened To Acquire A Great Acquirer In Global Payments?

For the most part, the only thing I really haven't liked about the merchant acquirer/card processing space is that a lot of the leading independent players like Global Payments (NYSE:GPN), Heartland Payment (NYSE:HPY), and Vantiv (NYSE:VNTV) sported pretty eye-watering valuations and established rivals like JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), and Bank of America (NYSE:BAC) have all been quite keen on generating more growth from this lucrative non-banking operations.

Since last writing on Global Payments (and Heartland, for that matter), the company has delivered a few more solid quarters of constant currency growth and pretty respectable cash operating margins. Global Payments also reached a deal to acquire Heartland, and I believe investors have blanched at the steep premium that Global Payments is paying, as well as the risk that integration will be trickier than advertised. Since the time of the deal announcement, the shares have lost about one-quarter of their value.

I'm probably crazy for saying this, but I actually think this sell-off has created a window of opportunity to acquire what will become the sixth-largest merchant acquirer in the U.S. and a growing player abroad. There are most definitely real risks in integrating Global Payments and Heartland, and sector valuations are not a positive in this market environment, but I believe the combined entity should be worth closer to $57/GPN share today.

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Has A Window Opened To Acquire A Great Acquirer In Global Payments?

Seeking Alpha: Global Payments Amply Rewarded For Solid Growth Traits

Investors are definitely excited about the long-term potential of companies tied into non-cash payment systems and processing. Between Vantiv (NYSE:VNTV), Heartland Payment (NYSE:HPY), and Global Payments (NYSE:GPN), Vantiv is the laggard in having appreciated "only" 15% or so over the last year. Global Payments has maintained a more torrid pace, rising 45% over the last year and another 25% since my last update on the company.

I continue to be a little surprised at the extent to which Global Payments continues to identify opportunities to build its revenue base, its competitive positioning, and its long-term margin structure. I'm a little more surprised at the extent to which the Street seems more than happy to continue paying a high price for those improvements. The market seems to already be discounting 20% long-term annualized free cash flow growth, and that seems like a steep price when rivals like JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and U.S. Bancorp (NYSE:USB) not only possess competitive scale in the acquiring/processing markets but are looking to non-banking markets like this as a way to offset sluggish prospects in their core banking operations.

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Global Payments Amply Rewarded For Solid Growth Traits

Seeking Alpha: Heartland Payment Once Again Going Off On Its Own

If you're a company involved in payment processing, you've likely been seeing a good run in your share price. Although I didn't think Heartland Payment Systems (NYSE:HPY) looked particularly cheap back in July of 2014, the whole sector has done well since then. Heartland is up about 20% since that piece, with Vantiv (NYSE:VNTV) up a similar amount, Total System Services (NYSE:TSS) up almost 30%, and Global Payments (NYSE:GPN) up almost 40%.

I admit to being more than a little surprised by this run at Heartland Payment. I like the company's small/medium enterprise focus in card processing and the company's commitment to price transparency. I also like the efforts to diversify the revenue base, but the company has had some missteps with its acquisitions and margin leverage has stalled as the company invests for what management hopes will be a new leg of growth.

Already wrong once, I'm hesitant to beat the drum again and argue that Heartland is overpriced. The market certainly already expects a lot from a cash flow perspective, as high single-digit net revenue growth (10 years, annualized) and 20%-plus FCF growth rate (with long-term FCF margins in the high teens) isn't enough to get to today's price. On the other hand, management is recrafting itself as a provider of payment technology services to SMEs and targeting significant margin leverage in its non-card operations, as well as looking to integrated point of sale systems to generate sticky revenue. With the shares trading inline with near-term EBITDA growth prospects, I suppose there's still a play here for more aggressive investors.

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Heartland Payment Once Again Going Off On Its Own

Seeking Alpha: Heartland Payment Offers Increasingly Diversified Growth

Not a lot has changed about Heartland Payments (NYSE:HPY) over the last eight months. When I last wrote about Heartland, I thought the company was a quality growth play on the increasingly cash-less transaction market and was pursuing some quality growth opportunities outside of merchant acquiring and payment processing. The problem then and now is valuation; I thought Heartland was well-valued in November and the market-lagging 1% appreciation since then doesn't change my view. While I like Heartland as a low-teens grower over the next decade, the valuation already seems to anticipate that.

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Heartland Payment Offers Increasingly Diversified Growth 

Seeking Alpha: Global Payments' Transformation Continues

Merchant acquiring isn't the most exciting business - truth be told, the entire acquiring / network / interchange system is probably boring to most people - but Global Payments (GPN) has a lot of interesting drivers working right now. The company's transition away from ISOs and toward direct acquisition should be good for margins over time, and the company has an uncommonly strong position outside the U.S. With the company also embracing integrated payments, higher revenues and margins should also be in play down the line.

Global Payments' efforts haven't gone unnoticed. Since I last wrote, the shares are up about 20% on increasing bullishness over the company's efforts to expand into integrated offerings and speculation that the company's overseas position could make it an M&A target. These shares don't seem mispriced in the market right now, but could still generate a good high single digit to low double-digit annual return from here.

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Global Payments' Transformation Continues

Seeking Alpha: Heartland Payment's New Ventures Make Sense, But Mind The Multiples

With the markets up as much as they are over the past two years, it's not so surprising that there are a lot of stories out there along the lines of "it's a good company and they have a good plan, but be careful about the valuation".

Payment processing service provider Heartland Payments (HPY) definitely fits that description for me. I believe the company's direct sales force and uncommon transparency give it an edge in the processing space. Likewise, I believe the company's forays into newer businesses like payroll and education-related processing can generate worthwhile returns. I just question whether there's a lot of loose change left in the couch for a stock that is up more than 100% over the past two years and trading a little rich relative to its growth.

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Heartland Payment's New Ventures Make Sense, But Mind The Multiples

Seeking Alpha: A Clean Quarter Does Wonders For Global Payments

It's been a challenging year for Global Payments (GPN) shareholders, as the stock has chopped around between $42 and $50 on a series of "yes, but..." quarters and uncertainties regarding the company's ability to overcome a past security breach, evolving dynamics in the payment industry, and growth challenges overseas.

Maybe this fiscal first quarter will bring closure to some of those questions. Certainly the stock has been on a good run from around the start of September, and the Street seems to be happy with the accelerated share repurchase that was announced with this earnings report. I continue to be more bullish than average on Global Payments, and believe there could still be upside into the mid-$60's on ongoing growth in international markets.

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A Clean Quarter Does Wonders For Global Payments

Investopedia: Global Payments Still Feeling An Uncomfortable Squeeze

Life still isn't easy in the narrow space between merchants and banks. Regulators have taken a much sharper pen to the fees that many players along the way can charge and earn, rivals continue to bludgeon each other for market share, and new entrants like Square threaten to upset the entire apple cart. That's led to less-than-spectacular performance from merchant acquirer and processor Global Payments (NYSE:GPN), as well as long-term concerns about the sustainability of what had previously been a pretty high-margin/high-return business model.

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http://www.investopedia.com/stock-analysis/040313/global-payments-still-feeling-uncomfortable-squeeze-gpn-hpy-vntv-v.aspx

Investopedia: Global Payments Looks Too Cheap Today

Merchant processing firms such as Global Payments (NYSE:GPN) run relatively simple businesses - a customer swipes a card at a store, Global Payments sees that the money goes where it needs to between the banks, and it takes its cut. While there's ample competition to sign up (and retain) merchants and data breaches are an ever-present threat, these can be very profitable businesses with good returns on capital. In the case of Global Payments in particular, this not only looks like a profitable, growing business, but it's also one with an undemanding valuation and good global growth prospects.

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http://www.investopedia.com/stock-analysis/2013/Global-Payments-Looks-Too-Cheap-Today-GPN-HPY-WFC-TSS0110.aspx

Investopedia: Heartland Payments Another Company Poised To Rebound With Small Businesses

Setting aside the ceaseless news media squabbling over whether the private sector is getting stronger (and doing so fast enough), there is a large ecosystem of publicly traded companies leveraged to a recovery in small and mid-sized businesses (SMB). As a large payment processor oriented towards the SMB category, Heartland Payment (NYSE:HPY) is one such company.

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http://stocks.investopedia.com/stock-analysis/2012/Heartland-Payment-Another-Company-Poised-To-Rebound-With-Small-Business-HPY-BAC-V-MA-GPN0628.aspx

Investopedia: Intuit A Stealth Play On Multiple Growth Markets

Intuit (Nasdaq:INTU) is still, likely, best known for its tax software, and the various small to medium-sized business software packages (like QuickBooks) that it offers. What is not so well-known, though, is that Intuit is actually a large software as a service (SaaS) provider, and a growing player in markets like payroll, payment solutions and bank infrastructure. While Intuit likely suffers a bit from "neither fish nor fowl syndrome," and less impressive growth than cloud computing titans like Salesforce.com (NYSE:CRM) and VMware (NYSE:VMW), this is a surprisingly complicated yet high-return company.

Decent Results in a Slow First Quarter  
For better or worse, Intuit is still at a point in its life cycle where seasonality matters. To that end, this fiscal first quarter, a quarter in which there is little demand for tax software, is a fairly sleepy one. Nevertheless, reported revenue rose 12%, and the company posted a 13% growth in its small business segment, as subscriber growth for products like QuickBooks Online, QuickBooks Enterprise Solutions and online payroll was all quite good.

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http://stocks.investopedia.com/stock-analysis/2011/Intuit-A-Stealth-Play-On-Multiple-Growth-Markets-INTU-HRB-CRM-ORCL-GOOG-MSFT-PAYX-VMW1122.aspx

Investopedia: VeriFone Not Lacking In Growth Or Confidence

Consumers may be more reluctant to open up their wallets at retailers these days, but retailers and service providers are still quite willing to spend their own money on technology to make it easier for consumers to spend. To that end, payment solutions provider VeriFone (NYSE:PAY) is continuing to see excellent growth and momentum, and management is not lacking in confidence about the company's prospects.


A Strong Third Quarter
VeriFone has a solid reputation for surpassing analyst estimates and this quarter was no exception. Revenue jumped 21% from last year (8% sequentially), and the company beat the midpoint of analyst estimates by about 6%. Business in the U.S. was weak (on difficult comps), as North American sales fell 1% from last year. Growth was quite strong everywhere else, though - reported results from Europe jumped 56%, while Asia and LatAm grew 42% and 23%.

After the quarter ended, VeriFone completed its acquisition of Hypercom. Hypercom's last 10-Q (ended June 30, 2011) showed revenue of over $119 million and growth of 15% (though down about 13% in the Americas), but investors should remember that divestitures mean that the company will not reap 100% of that former business.



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http://stocks.investopedia.com/stock-analysis/2011/VeriFone-Not-Lacking-In-Growth-Or-Confidence-PAY-GOOG-EBAY-HPY-IBM-DHR-V0912.aspx

Time To Act Locally On Global Payments?

Fishing for turnarounds is a little like fishing for sharks - get a bit careless and you could find yourself bitten. That is a good warning to keep in mind when perusing the recent earnings report and stock action from Global Payments (NYSE:GPN). While this leading transaction processing service company has a lot of value-type characteristics, its poor margin performance and questionable guidance are warning signs. 

The Quarter That Was
Global Payments certainly did blow away expectations this quarter. Total top line growth was about 7% for this fiscal first quarter, with strong results in the U.S. and Asia somewhat offsetting a pathetic performance in Canada and Europe. That is a feeble performance relative to the likes of Visa (NYSE:V) or Green Dot (Nasdaq:GDOT) (to be fair, these aren't entirely straight up comparisons).

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http://stocks.investopedia.com/stock-analysis/2010/Time-To-Act-Locally-On-Global-Payments-GPN-V-GDOT-DFS-MA-CM-HPY1013.aspx