No Point – Not at Paypoint


Paypoint is a dynamic company at the forefront of electronic point of sale technologies, delivering what its name suggests, to an interesting plethora of blue chip names across a multitude of different countries.

Paypoint’s success is heavily dependent on a very high volume of satisfied end users and to this end its market penetration thus far is extremely impressive, with its point of sale gizmos supporting electronic transactions in 28,200 shops.

This market penetration has been seen by as a result of commercial tie-in with some impressive blue chip names such as ASDA, Sainsbury’s Local, Tesco Express, Londis, Costcutter, Co-op, and SPAR, to name a few.

Point of sale is a restrictive term by which to describe Paypoint’s end user; ‘point of end user transaction’ would be more apt, as they also operate LINK branded cash machines, energy meter pre-payments, benefits payments, transport tickets, TV Licences, and mobile top-up services.

In all, Paypoint has some 6,000 clients and merchants delivering 800 million transactions worth £15 billion annually, so having an utterly robust 24/7 platform of operation is mandatory to their success.

Mawer Investment Management Ltd. has recognised Paypoint’s growing position in the marketplace and has taken its holding to nearly 7% over the last few months. This seems to be a good move given that Paypoint’s 6 monthly financial results to 30 September show a rising trend in pre-tax profits (up 5.5%), dividend (up 8.8% to 12.4pps) and sales (up 2.1% to £104.3m).

Historically, the period March to June has seen favourable rises in all years from 2008, ranging from 10% to 68% (assuming perfect capture of trough to peak in each year). Average returns have equated to approximately 30% during these periods. Should shares move up from their March low in line with these numbers then the share price would equate to £8.99, £13.74 and £10.63 respectively.

Mawer seem to have noticed some very good reasons to buy in and it would appear their due diligence could well be rewarded with shares currently languishing within their November 2012 to May 2013 trading range of £8.20 to £9.00 which should provide adequate support.

A break below £8.00 would probably mean shares are likely to continue falling so watch carefully.

Date Company Status Mid Price Target 1 Target 2 Target 3 Target 4
30/04/2015 Paypoint Initial write up £8.55 £9.17 £9.97 £10.90 £11.95

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