Update 4/29: PAY priced $10 as suspected: see below
15.4 million shares at a range of $12-$14, JP Morgan lead, 4 other large houses also participating. Hewlett Packard bought Verifone in 1997 for 1.3 Billion..Controlling interest later went to GTCR and at midpoint of range will have a cap of roughly 750 million.
Global electronic payment transaction technology. 15% annual revenue growth each of past two years, this is a nice biz to be in----we're swiftly heading to a cashless/paperless society and the companies that dominate the cashless/checkless/paperless backbone should benefit from much swifter than overall economy growth into the foreseeable future.
A solid ipo from 2 years ago IPMT is in the same general sector although IPMT's focus on small biz point of sale transactions in the united states, PAY much more of a backbone worldwide. the 2 year ipmt chart:
Customer base spread thru many different industries and all over the world.
These guys have the largest number of EPT systems in the world, and they believe they're the largest in number of Electronic Point Of Sale transactions in the world....so we've got a leader in a sector that should offer much higher than overall economy revenue growth into the foreseeable future...that's a big plus in their column.
Growth strategy from here is: expand in North America by remaining at forefront of industry innovation; go hard after emerging markets internationally...their big growth driver last few quarters has been international market.
This is yet another leveraged buy-out offering, however all of the offering money is going to clean up the balance sheet, not to the LBO company....after the offering they'll have a .25ish debt to equity, not ideal, but also not something that should slow them down or be much of a hindrance. If they choose, they can pay that down by 1/2 over next 2-3 years, plus will most likely be coming back to market for a secondary to take care of the rest. In their sector, with their organic growth and cash flow, the debt to equity number not a problem in my opinion.
Insiders will be sitting on essentially free stock, 50 million shares worth so there will be selling in 180 days; quite a bit of selling.
Coming about 1.6 times projected '05 revenue at midpoint of range.
their expenses have been pretty smooth, they've done a nice job keeping operating expenses under control allowing a nice piece of the revenue growth to flow to the bottom line, giving them good earnings leverage going forward from current revenue number....usually a sign of a solid management team that has a handle on their biz.
I think they can put 50 cents on the bottom line in '05, they did roughly 10 cents in the january 31 '05 quarter so not a huge stretch...I folded out $1 million annually from debt service, as they'll be paying down a chunk of debt on offering. so '05 pe at midpoint would be roughly 26 X's earnings with an expected 12-15% revenue growth.....If they're able to keep a handle on operating expenses as they have done, I don't think 65-70 cents in '06 is out of the question at all, putting them roughly 19 X's forward earnings.....not too bad, but after this recent sell-off not bargain basement either for this market.
they did have their best quarter to date in 1/05, and I do attempt to be conservative, so there is a chance they could earn more in '05/'06. In fact more so than usual, I think my numbers may be conservative as portions of their biz really took off in europe/asia recent two quarters. In fact I'd be really surprised if PAY didn't at least hit my above numbers, with some of the recent growth trends they're experiencing.
conclusion: top-notch company, sector leader that worldwide should experience 15% topline growth annually at least next 2-3 years. In a decent market this would be a no-brainer around pricing, in this current tough environment I'd like to see a discount pricing here....If so I think it would provide an excellent risk/reward entry mid term. At mid-point of range they will be coming at a slight premium to competitors, but due to size they should trade at a bit of a premium...I'll update this section after PAY prices, either early tomorrow(4/29) or next week--looks like it might be pushed out.
This is a strong offering, I think in this environment there is a chance no one may want it in pricing range and they may have to slash price to $10ish or postpone---if it comes at $10 it's a steal. At $11-$13 it's definitely worth a shot even in this environment with a stop-out on pricing to re-evaluate.
This is everything you want to see in an offering, global leader in a strong trending growth area, strong management team etc...if this somehow gets slashed to $10, PAY will be coming roughly 14-15 X's forward earnings, and I believe with their position and in the sector they operate, that's a gift.