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Canaccord Genuity rasies target price on PayPoint
12th Apr 2021 10:15
(Sharecast News) - Analysts at Canaccord Genuity raised their target price on payments provider PayPoint from 800.0p to 825.0p on Monday, stating a return to growth was "likely" as it highlighted some "material re-rating potential".
Canaccord said that following recent mergers and acquisitions, its in-depth analysis of PayPoint's upgraded portfolio suggested "early success" in the journey towards increasing focus on digital payments and services in order to outgrow the roughly one-third of revenues generated from declining cash transactions.
After high-single-digit net sales declines in the first nine months of 2021 due to Covid-19 and other factors, Canaccord now expects PayPoint to post broadly flat sales in its fourth quarter, followed by a return to growth in the 2022 full-year.
In the mid-term, the analysts estimate PayPoint's current portfolio can deliver "low-single-digit organic revenue expansion", driven by growth in card payments, parcel services, EPoS subscriptions and e-money.
"We see potential upside to this from successful cross-selling between PayPoint's ~28k convenience retailers and the recently acquired ~30k Handepay SME customer base. On our estimates, successful execution here could potentially add 5% to sales over time," said Canaccord.
The Canadian bank, which also stood by its 'buy' rating on the stock, highlighted that on a price-to-earnings ratio of around 11x, the shares were trading at the low end of their historic range and below lower-margin UK retailers.
"This depressed valuation in our view reflects recent sales declines but ignores our expected return to growth and the improving sales mix," concluded the analysts.
Canaccord said that following recent mergers and acquisitions, its in-depth analysis of PayPoint's upgraded portfolio suggested "early success" in the journey towards increasing focus on digital payments and services in order to outgrow the roughly one-third of revenues generated from declining cash transactions.
After high-single-digit net sales declines in the first nine months of 2021 due to Covid-19 and other factors, Canaccord now expects PayPoint to post broadly flat sales in its fourth quarter, followed by a return to growth in the 2022 full-year.
In the mid-term, the analysts estimate PayPoint's current portfolio can deliver "low-single-digit organic revenue expansion", driven by growth in card payments, parcel services, EPoS subscriptions and e-money.
"We see potential upside to this from successful cross-selling between PayPoint's ~28k convenience retailers and the recently acquired ~30k Handepay SME customer base. On our estimates, successful execution here could potentially add 5% to sales over time," said Canaccord.
The Canadian bank, which also stood by its 'buy' rating on the stock, highlighted that on a price-to-earnings ratio of around 11x, the shares were trading at the low end of their historic range and below lower-margin UK retailers.
"This depressed valuation in our view reflects recent sales declines but ignores our expected return to growth and the improving sales mix," concluded the analysts.