Optimal Payments (OPAY) may have an ace up its sleeve. The gambling-focused online wallet and payment-processing specialist plans to acquire a major rival, Skrill, for about £846m. It broke the news as it revealed that its cash profits rose by almost two-thirds to $86.1m (£57.7m) in 2014.
The deal promises to reduce competition, improve Optimal's pricing power and help it target technology and marketing investments. It could also reduce the group's dependence on its largest customer - who accounted for about 37 per cent of full-year revenue - and on Asia. Management expect to stomach $26m in one-off costs by the end of 2016, but foresees $40m in annual cost savings from then on. It plans to raise £451m through a rights issue and pay the balance with cash and debt.
A first-half boost from the FIFA World Cup helped drive sales at Optimal's Neteller and Netbanx businesses up 50 and 42 per cent respectively. Netbanx's top line also benefited from two acquisitions in the US, though the cost of integrating them pushed group operating expenses up by a half to $147m. Optimal also launched a new card-issuing division and Netellergo!, an online checkout page aimed at e-commerce merchants.
Broker Numis thinks Skrill could treble Optimal's cash profits to $262m in 2017. It expects EPS of 27.4¢ this year (from 38.1¢ in 2014).
| OPTIMAL PAYMENTS (OPAY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 419p | MARKET VALUE: | £683m | |
| TOUCH: | 419-550p | 12-MONTH HIGH: | 555p | LOW: 270p |
| DIVIDEND YIELD: | nil | PE RATIO: | 17 | |
| NET ASSET VALUE: | 128¢ | NET DEBT: | 16%† | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2010 | 62 | -3.8 | -3.0 | nil |
| 2011 | 128 | -26.2 | -21.0 | nil |
| 2012 | 179 | 3.6 | 1.0 | nil |
| 2013 | 253 | 32.7 | 22.0 | nil |
| 2014 | 365 | 59.0 | 36.0 | nil |
| % change | +44 | +80 | +64 | - |
*Includes intangible assets of $281m, or 173¢ a share †Net of merchant cash £1=$1.49 | ||||
