Net 1 UEPS Technologies, Inc. (NASDAQ:UEPS) $UEPS: Strong cash flows, low debt, high margins, high growth
Wednesday, June 10, 2015 · Tobias Carlisle
Net 1 UEPS Technologies, Inc. (NASDAQ:UEPS) has been on a tear in 2015, up almost 40 percent year-to-date. Even so, it’s still the tenth cheapest stock in the All Investable Screener with an acquirer’s multiple of 5.7, a PE of 7.7, and a FCF/EV yield of 14.7 percent. It’s bought back $7 million of stock in the last twelve months too, so management are acting on the discount.
Long/short equity, long-term value investor Jung-Yung Jonathan Chang has a great presentation on UEPS:
Summary
- Unbanked population, as defined by the World Bank, has no access to financial services or transaction processing. Instead, many tend to use cash which presents many problems.
- Net1 UEPS’s technology provides much needed services to African and Asian areas that are developing.
- Growing trends in mobile use and mobile payments, coupled with organic growth opportunities provide UEPS with attractive macroeconomic tailwinds.
- Having recently elected to withdraw from RFP bid for new SASSA contract, there will be much more flexibility for the company given its past SASSA history and government regulation.
- Healthy financials with strong cash flows, low debt, high margins, high growth (20% 5YR CAGR), and large discount based on relative and intrinsic valuation. DCF implied valuation with 100% upside.
He provides three investment theses.
This is my favored thesis: It’s too cheap!
The PDF of the presentation can be found here.
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