PayPoint (LON:PAY) offers innovative and time-saving technology to make life more convenient, particularly in the UK and Romanian convenience retail sectors. Its main growth drivers include its MultiPay payments digital, voice, cards, and cash platforms, its Collect+ parcels service, and its leading retail services technology.
The company views its UK operation as its core business as it now services over 28,000 sites there and its Romanian operation as its growth business.
Paypoint’s long-term vision is to embed its technology-enabled platform at the heart of UK and Romanian convenience retail estates while generating revenue from driving footfall into shops, providing a range of services to shopkeepers, and potentially benefiting from a wider ecosystem.
Its recent results show that its products and services continue to take hold. In the final quarter of 2018, net revenue increased 1.4% (up 0.9% in the UK and up 4.8% in Romania), bolstered by 31.3% growth in UK service fee revenue and 43.6% growth in MultiPay transactions.
Additionally, the parcels business had a successful Christmas season with their new partner, eBay. The strong progress across all growth initiatives caused management to hike its year-end target for PayPoint One to 12,700 (currently operating in over 12,000).
Management believes that growth trends should continue thanks to how well the company’s business model aligns with the favorable market opportunity. In particular, convenience shopping is growing rapidly in the UK, with the percentage of total sales conducted through convenience, discount, and online channels expected to increase over the next several years.
While independent convenience retailers occupy two-thirds of the convenience market, only one-third of them have EPoS, giving PayPoint a tremendous opportunity to add value to their operations and grow accordingly.
Its system will enable stores to more accurately price products, reconcile payments through various mediums, minimise losses through enhanced staff cash accountability as well as sales and refunds, offer management more detailed business insights by time, day, week, and product category, and improve stock awareness and control.
As the first technology provider to bring bill payments, parcel services, and a cloud-based/tablet-enabled till system to local shops, PayPoint also enjoys credibility and competitive advantages over competitors. PayPoint’s business model also offers the potential for considerable cash generation for investors thanks to its low-cost, high margin, scalable, and technologically advanced platform.
Conclusion: Over the long-term, the company’s success will be largely dependent on how well it fares against competitors as convenience shopping definitely appears to have a strong growth runway ahead of it. Given its first-mover advantage and location in a fast growing market (Romania), it appears primed to continue its solid growth rate for the foreseeable future. Priced at around 14x earnings and ~25% down from highs, shares appear attractively priced here.
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Samuel S.