Ingenico (ING FP): Fundamentals & Speculative - There is no Taboo – In GENIOUS Co.
Following horrible FY2018 during which INGENICO issued 3 profit warnings making the company market capitalisation divided by 2, early 2019 the Board has reshuffled the management with the departure of Mr Lazare and has decided to separate the functions of Chariman and CEO. Mr B.Bourigeaud (Founder of Atos) has been appointed Chairman of the Board and Mr N. Huss(former Visa Europe CEO before being bought by Visa Inc.) has been appointed CEO. We would add as other top managers Ms J.Miles, ex N.2 at Verifone after being bought by Francisco Partners, that has a deep knowledge of Ingenico main competitors and North America markets; Mr J.Tjarnberg, ex Bambora CEO and Point Group being bought by Verifone and Mr N.Santschi, ex CEO of BSPAyone after the JV made by Ingenico and ex CEO of Six Payment Services after being bought by Worldline.
Last Spring 2019, during its Capital market Day, the management has presented the “Fit for Growth” strategy aiming at reinforcing/restructuring Ingenico into 2 business units : Banks & Acquirors (mainly Terminals) and Retail (payment solutions/services). Over the 2019 year, Ingenico share price performance (up 95%) has clearly highlighted the good performance of the company that translated in its Q3 2019 results’ presentation to slightly upgrade its FY 2019 targeted revenues and EBITDA. Since January 1st 2020, the 2 BU are now reporting indepently suggesting a possible spin-off / sale of the B&A division or full sale to a potential acquiror (During the 2018 “crisis”, Natixis Payment was rumored to be interested by the Retail division to strengthen its position in the sector.
Despite its tremendous share price performance, Ingenico is still laging peers in the sector that has experienced a major wave of consolidation : Verifone bought by Francisco partners for x11.2 EV/EBITDA, Vantiv/Fiserve/Worldpay, Nets by Hellman & Friedman, Paysafe by CVC/Blackstone…
CONCLUSION: The split into 2 Reporting independent business units will highlight the growth potential of the Retail Unit. Ahead of Ingenico FY 19 results to be published on February 25th, we would highlight investors that our base case valuation would stands in the EUR115/120 range. Applying peers multiple would give a EUR130/135 target price and our Blue sky scenario (applying precedent multiples‘ transactions with a premium due to Ingenico leadership position eg x12 EV/EBITDA for B&A and x15 EV/EBITDA for retail) could see Ingenico reach the EUR165 price. All in all, we think that the potential upside stands in the range of 20 to 40%and would therefore recommend investors to initiate a position.