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.
Gapping down
In reaction to disappointing earnings/guidance:
- VFC -4.8%, PRA -4.2% (reports preliminary loss estimates; sees $37 mln of adverse development in Specialty Property & Casualty segment), RJF -4.2%, WBS -3.1%, FUL -2.8%, TCBI -2.6%, HBAN -1.9%, TRV -1.8%, PG -1.7%, TXN -1.1%, AAL -1%, CADE -0.9%, LUV -0.9%
Other news:
- KRTX -13.7% (still looking around for catalyst)
- AUTL -11.8% (prices offering of 7.25 mln ADSs at $11.00 per ADS)
- IMGN -7.3% (prices offering of 21.325 mln shares of common stock at $4.25 per share)
- ZYME -5.6% (announces pricing of $279.0 mln public offering)
- ACRE -3.6% (prices underwritten public offering of 4,000,000 shares of common stock for total estimated gross proceeds of approximately $64.4 mln)
- NK -3.6% (modestly pulling back from today's 15% move higher)
- MSON -2.9% (commences underwritten public offering of its common stock)
- XENE -2% (prices offering of 3.75 mln shares of common stock at $16.00 per share)
- MGY -1.2% (downgraded to Neutral at Credit Suisse)
Analyst comments:
- TSLA -1.8% (downgraded to Neutral from Outperform at Exane BNP Paribas)
- ALTR -1.4% (downgraded to Sell from Neutral at Guggenheim)
- W -1.2% (downgraded to Hold from Buy at Loop Capital)
- COP -1% (downgraded to Sector Perform from Sector Outperform at Scotiabank)
- DLTR -0.9% (downgraded to Neutral from Buy at BofA/Merrill)
- BJ -0.7% (downgraded to Neutral from Buy at BofA/Merrill)
- ORLY -0.7% (downgraded to Underweight from Neutral at Atlantic Equities)
- XOM -0.5% (downgraded to Sector Underperform from Sector Perform at Scotiabank)
Gapping up
In reaction to earnings/guidance:
- HZO +30.1%, SLM +22.1%, TER +9.2%, PTC +8.8%, STM +7.2%, CTXS +4.3%, STLD +4%, BANC +3.6%, JBLU +3.1%, MTB +2.4%, CMCSA +2.1%, KMI +1.2%, UMPQ +0.8%, KMB +0.8%
Other news:
- EYE +8.4% (amended Walmart management & services agreement adding new vision centers)
- PCG +4.9% (reaches agreement with ad hoc noteholder committee; to support PG&E's plan of reorganization)
- PAYC +4.5% (to join S&P 500)
- BHVN +2.1% (Biohaven Pharmaceutical collaborators receive FDA approval to proceed with clinical investigation of verdiperstat in ALS)
- ELAN +1.1% (priced its previously announced concurrent public offerings of 22,694,732 shares of its common stock at $32.00/share)
Analyst comments:
- LB +4.7% (upgraded to Overweight from Underweight at Barclays)
- WDC +3.3% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- GE +2.3% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- ASC +2% (upgraded to Buy from Hold at Stifel)
- MU +1.9% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- SAN +1% (upgraded to Buy from Neutral at UBS)
Early premarket gappers
- Gapping up:
- SLM +23.2%, TER +9.6%, EYE +8.4%, PTC +8.1%, STM +6.7%, PAYC +4.4%, CTXS +4.1%, STLD +4%, BANC +3.6%, CRON +0.8%, UMPQ +0.8%, STL +0.5%
- Gapping down:
- KRTX -11.9%, AUTL -11.2%, IMGN -8.1%, ACRE -4.5%, PRA -4.2%, RJF -4.2%, NK -3.9%, XENE -3.5%, MSON -2.9%, TCBI -2.6%, LUV -1.8%, MGY -1.2%, FUL -0.7%, TXN -0.6%