Strategy progress

Safecharge’s strategy to win tier 1 customers is progressing as planned. In new verticals, it’s now processing and acquiring European card transactions for Nayax, which is a solutions provider for the unattended machine industry. This includes vending machines in over 100,000 locations worldwide. In traditional verticals, Safecharge has higher quality revenue after tier 1 client wins such as PaddyPower Betfair and Sun Bingo. This should provide it with greater stability and resilience, while also boosting its growth rate.

In new markets, the company is now operating in Italy, Romania, Portugal and Poland. This increase in geographic diversity reduces the company’s risk profile, while also allowing it to access potentially higher rates of growth over the medium term. And with a new office in Singapore as well as expansion within the travel and airlines market, the outlook for the business is very encouraging.

Looking ahead

Safecharge is forecast to record a rise in its earnings of 28% in the current year, followed by further gains of 12% next year. On their own, such strong growth rates have the potential to improve investor sentiment. However, when combined with a price-to-earnings (P/E) ratio of 14.7, it equates to a price-to-earnings growth (PEG) ratio of 0.7. This indicates that there’s a wide margin of safety on offer, which should lead to substantial share price growth in future years.

In addition to growth and value appeal, Safecharge also has excellent income prospects. It yields 5.5% from a dividend that’s covered 1.2 times by profit. Alongside its high earnings growth rate, this indicates that there’s scope for a brisk rise in dividends.

Relative appeal

The payments services market is relatively broad and highly competitive. One operator within the mobile payments space that has enjoyed success in winning major clients is Monitise. Its mobile banking platform has been popular with customers and consumers alike. And the bad news? The company hasn’t been able to turn a successful product into a winning business model.

For example, Monitise remains lossmaking and is forecast to be in the red in the current year. While it has the potential to turn itself around in the years ahead, Safecharge is the company that’s performing well now. As such, it offers a much lower risk profile than Monitise, as well as clear catalysts to push its share price higher and a generous, well covered yield. As such, I’d buy Safecharge, but would avoid Monitise.

The post Why I’d buy Safecharge International Group Ltd over Monitise plc appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Paysafe upgraded its guidance in August and it expects revenue to be in the range of $970m-$990m for the full year. Assuming an adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) margin of 29.6%, its adjusted EBITDA is due to be anything from $287m to $293m. As well as delivering on its guidance, Paysafe is also focused on further expanding its payments business and enhancing its core technology platform. This should provide the company with further growth opportunities over the medium-to-long term.

Clearly, digital payments are becoming increasingly popular as consumers demand more convenient and accessible services. This trend looks set to continue over the coming years and while digital payments have become more prevalent across the globe in of late, there’s still considerable potential for increased take-up across both the developed and developing world.

Despite the potential of the wider industry, Paysafe continues to trade on a reasonable valuation. It’s forecast to increase its bottom line by 14% in the next financial year and yet has a price-to-earnings (P/E) ratio of only 13.6. This means that Paysafe trades on a price-to-earnings growth (PEG) ratio of less than 1, which indicates that it has at least 25% upside potential over the medium term.

And the competition?

Of course, the digital payments space is highly competitive and one company that has struggled to turn a profit given this backdrop is Monitise (LSE: MONI). For example, in the last financial year Monitise recorded a pre-tax loss of £243m. Although it’s expected to narrow its losses in the current year, Monitise’s pre-tax loss is still expected to be £16m.

Certainly, over the long term Monitise has the potential to turn its financial performance around. However, it has struggled to turn a profit even though its product has proved popular and it has been able to win blue chip clients. Therefore, sticking with an already profitable company such as Paysafe is a lower risk option.

This doesn’t mean that Paysafe offers any less of a potential reward than Monitise. In fact, Paysafe operates in over 200 countries and therefore has the potential to capitalise on faster growing economies within the emerging world. It also means that Paysafe is relatively well diversified and this improves its risk/reward ratio yet further.

As such, Paysafe seems to be a sound buy at the present time, with its business model, operating environment, valuation and near term performance indicating that a gain of 25% is well within its reach.

The post This growth stock has 25%+ upside appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Significant progress

Sales fell by 24.7% to £67.6m at Monitise in the latest year, in line with guidance. But the group’s EBITDA loss was reduced by more than half to £19.6m, and Monitise reported an EBITDA profit of £0.6m for the second half.

Performance improved significantly during that half as cash from operations turned positive, rising to £400,000. However, the business remained heavily lossmaking, reporting a pre-tax loss of £32.6m for the period.

Net cash fell from £88.8m to £42.1m during the year, but cash consumption was reduced to £11.9m during the second half, from £36.4m in the first half. As Monitise is lossmaking, this is a key metric for investors. A lower rate of cash burn will give the group more time to become profitable.

Monitise hopes that its FINKit digital services solution will replace many of its legacy licence-based contracts. But persuading clients to agree new long-term contracts is “taking longer than we had anticipated” according to chief executive Lee Cameron, who says that Monitise “remains a business in transition.”

I was initially encouraged by today’s figures, but the group’s outlook statement has left me uncertain about the future. Group revenue is expected to decline and no mention was made of EBITDA guidance for the current year. This suggests to me that Monitise may not maintain the EBITDA profitability seen over the last six months.

Record profits boost dividend

Avation reported revenue of $71.2m last year, a 25% increase on the previous year. Operating profit rose by 35.6% to $45.6m, lifting the group’s operating margin from 59% to 64%.

Earnings per share rose by 42.5% to 34.2 US cents and the dividend rose by 8.3% to 3.25 cents. This gives the shares a trailing P/E of 6.2 and a dividend yield of 1.5%. The stock’s valuation looks cheap relative to earnings, even though the yield is low.

The main reason for this is Avation carries quite a lot of debt. When its aircraft are all leased at profitable rates, this isn’t a problem. However, in the event of a sector downturn, debt repayments could become problematic.

Avation added nine new aircraft to its fleet last year, causing net debt to rise to $567.5m at the end of June, up from $319.5m one year earlier. The group’s loan-to-value (LTV) ratio remained almost unchanged at 74%, up by just 1% from last year.

This stability is reassuring, but I think that 74% is quite high. I’d rather see LTV closer to 50%. This would reduce financing risks in a downturn and enable Avation to return more cash to shareholders — Avation paid $26m in interest payment last year, but just $1.6m in dividends.

In fairness, Avation appears to be executing well. The shares have risen by 25% so far this year. Growth is expected to continue and the shares could deliver further gains if market conditions remain favourable.

The post Two small-caps that could double after today’s results? appeared first on The Twelfth Magpie.

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Roland Head has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Gold’s upturn in 2016 has meant that Hochschild is enjoying a purple patch. Its bottom line is expected to rise by 152% next year and this puts it on a price-to-earnings growth (PEG) ratio of only 0.1. This indicates that even if the price of gold stabilises somewhat and even comes under a degree of pressure, Hochschild’s shares could still perform well owing to their wide margin of safety.

Looking ahead, the price of gold is unlikely to fall in the coming months. US interest rate rises are likely to be slow and steady due to fears surrounding the global economy and with investors likely to remain nervous following the EU referendum and ahead of the US election, gold may prove popular and be in demand as a store of wealth.

Uncertain outlook

Also rising today are shares in Monitise (LSE: MONI). The mobile payments solution specialist is up by over 10%, but as with Hochschild, it has released no significant news today. Today’s rise takes Monitise back into positive territory for 2016 as the company continues to offer a rather uncertain outlook for its investors.

For example, Monitise is expected to remain lossmaking in the current year and next year. However, its losses are set to narrow considerably, with a pre-tax loss of £33m forecast for this year, falling to £15m next year. This could improve investor sentiment in the stock as it shows that Monitise’s financial performance is moving in the right direction.

However, the reality is that Monitise has had huge potential for quite some time and despite an excellent product and major client wins, it has been unable to produce a black bottom line. Therefore, prudent investors may wish to await evidence of profitability before parting with their hard-earned cash.

Positive update

Meanwhile, Sound Energy (LSE: SOU) has risen by 14% today after it released a positive update regarding its Tendrara licence area, which is located onshore in Morocco.

Encouragingly, rigless operations are continuing and the results are already above company expectations as a significant stable flow has already been achieved. That’s despite so far having accessed only 18% of the total reservoir and no stimulation having yet been performed. Sound Energy will now complete the remainder of the rigless operation, after which the results will be announced.

This is clearly very exciting news for the company and it seems relatively likely that investor sentiment will continue to improve over the near term. Clearly, Sound Energy is highly dependent on news flow being positive, but for less risk-averse investors it could be worth a closer look.

The post Should you buy 3 of today’s biggest risers? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

On the one hand, Monitise has significant long-term potential. It’s operating in a space that’s becoming increasingly popular and that’s likely to benefit from greater use by consumers over the coming years. Furthermore, with Monitise having won a number of blue chip clients, it seems to have a successful product and has been able to market it effectively.

However, Monitise remains a lossmaking entity and until this changes, investor sentiment may remain relatively weak. And with increasing popularity comes increased competition, which could cause Monitise’s financial performance to come under greater pressure. As such, while it’s a stock to watch, it may be prudent to wait for evidence of profitability before buying-in.

Long-term buy

Also rising in the last six months have been shares in 32Red (LSE: TTR). They’re up by around 38% during the period, which is somewhat surprising since the wider gaming industry is going through a challenging period and is seeing a significant amount of consolidation taking place.

However, 32Red is forecast to increase its earnings by 62% in the current year and by a further 28% next year. This has the potential to cause an improvement in investor sentiment over the medium term, which could cause a further rise in the company’s share price. And with 32Red trading on a price-to-earnings growth (PEG) ratio of only 0.3, there seems to be significant scope for capital gains in the coming years.

Certainly, forecasts can be missed, but with a wide margin of safety and a dividend yield of 2% which is covered 3.6 times by profit, 32Red seems to be a strong long-term buy.

Improving sentiment

Meanwhile, Sirius Minerals (LSE: SXX) has enjoyed a prosperous six months, with its shares rising by around 17% during the period. At least some of this rise is due to improved prospects for the wider mining sector as opposed to specific news flow released by Sirius. But market sentiment is also strengthening due to brighter prospects regarding funding for the £1bn-plus potash mine that Sirius Minerals is planning to develop.

Clearly, raising funds for such a major project at a time when commodity prices have been under sustained pressure will be challenging. However, Sirius Minerals has recorded impressive crop study results and with an apparent high demand for its polyhalite fertiliser, as well as a more bullish outlook on the wider resources sector from investors, it could be a stock to watch in 2015.

However, with a number of other resources stocks being dirt cheap and highly profitable, there may still be better options available elsewhere for all but the least risk-averse of investors.

The post Are Sirius Minerals plc (+17%), Monitise plc (+7%) and 32Red plc (+38%) set for share price collapses? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Broker downgrade 

Moneysupermarket has been slapped with a broker downgrade from Jefferies this morning. The stock is down nearly 7% at 310p which is slightly below the new target from Jefferies of 312p. Jefferies had a 440p price target for the stock and this large cut in the price target is why investors are spooked and selling. However, fundamentally the business is very strong and it has become the go-to comparison website for financial services.

The forward price-to-earnings (P/E) ratio for 2017 is just 18, which is relatively cheap for a growing company. The company also pays a good dividend and shares currently yield 2.8%. For me this would be a nice addition to an income portfolio as further dividend increases could be around the corner. Simon Nixon, the founder, has recently sold his remaining stake for over £120m, which may have scared investors but at around 310p Moneysupermarket looks like a solid bet for the long term. 

Defensive rights issue 

Yesterday Cobham released the terms of its rights issue in which the company is raising £507m through a 1 for 2 rights issue at 89p. The company has been under pressure since the 70% drop in first-quarter profit, which has led to banking covenant problems. The CEO has stated that “the rights issue will put Cobham on sound financial footing by reducing gearing” and that the dividend will be maintained for this year.

Maintaining the dividend hasn’t been taken well by shareholders and I think there’s a small chance the dividend may be cut due to shareholder pressure. However, the main aim of the rights issue is to keep Cobham from breaking banking covenants and to ensure it has a solid balance sheet going forward. Shares in the company are down over 52% this year but I still think it’s too soon to be buying them. 

Struggling junior

Even though Monitise has many blue chip clients for its online payment services it has failed to turn this into any sort of profit. The company has made a loss over the last two years and there are no predictions of profitability any time soon. Losing the partnership with Visa was a big blow for the company and new payment systems from competitors are causing increased competition for the company. Monitise has struggled constantly over the last year or two and I see no change to that. I would avoid owning Monitise shares at all costs as the valuation looks high and the business model hasn’t been successful yet. 

These three companies are all down heavily today but I would still avoid Cobham and Monitise. Moneysupermarket is a bit different as it’s in a fundamentally strong position but the broker downgrade does raise some cause for concern. Such a large price cut is a red flag for many investors so shares may continue to drift lower in the coming months. 

The post Is today a good buying opportunity for Moneysupermarket.Com Group plc, Cobham plc and Monitise plc? appeared first on The Twelfth Magpie.

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Jack Dingwall has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. The Motley Fool UK has recommended Moneysupermarket.com. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

However, the period has been a tale of two halves, with Genel’s share price initially falling heavily due to a declining oil price as well as a reduction in reserves estimates for one of its key assets. In recent weeks though, Genel’s share price has begun a recovery of sorts, rising by 66% since its February low.

Clearly, there’s scope for the oil price rise to continue and for investor sentiment towards Genel to improve. However, Genel also appears to offer significant risks, with the expected impairment to its asset base resulting from lower reserve estimates likely to hurt investor sentiment over the medium term. And with Genel still suffering from relatively high geopolitical risks, there appear to be better options within the oil and gas industry for long-term investors.

Profits ahead?

Similarly, mobile payments specialist Monitise (LSE: MONI) is up by a rather modest 5% since the turn of the year. However, Monitise has risen sharply since its February low, with it being up over 70% since then.

Clearly, investor sentiment has improved dramatically even though Monitise is forecast to remain in the red during each of the next two financial years. And while its pre-tax losses are due to narrow to £33m this year and £15m next year, the company still appears to be some way off developing a business model that results in profitability.

Certainly, Monitise has an excellent product and has enjoyed considerable success in winning major blue chip clients. But with threats from other mobile payment solutions and the constant challenges of innovation, it may be prudent for investors to await evidence of a black bottom line before buying a slice of the company.

Capital gain prospects

Meanwhile, AFC Energy (LSE: AFC) has endured a very disappointing 2016 so far, with its share price falling by 37% since the turn of the year. That’s despite investor demand for the company’s shares seeming to be high, as evidenced by this year’s placing, which was oversubscribed by 3.8 times.

While its recent performance has been markedly worse than its 2015 share price rise of 122%, AFC Energy has considerable capital gain prospects. That’s largely because the world is moving towards the greater use of clean energy, which means that AFC Energy may be well-positioned to benefit.

Furthermore, AFC Energy has a sound strategy though which to deliver on its long term potential. Encouragingly, in 2016 it is focusing on the continued development of its capabilities and remains on track to deliver 1GW of capacity installed or under development by 2020. And with the scope for commercial agreements to be signed over the medium term, buying AFC Energy right now could prove to be a profitable long-term move.

The post Are Genel Energy plc, Monitise plc and AFC Energy plc set to rise or fall by 20%? appeared first on The Twelfth Magpie.

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• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens owns shares of AFC Energy. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Digger dives

Shares in potash play Sirius Minerals continue to trade in an extremely volatile manner, a 5% decline on Friday trading taking the stock to its lowest level in a fortnight.

Such extreme trading patterns are a common phenomenon for companies involved in the business of minerals and energy extraction, where news of bubbly discoveries — or conversely exploration disappointments — can prompt both panic buying and selling.

And so a blockbuster definitive feasibility study at its North Yorkshire polyhalite project sent Sirius Minerals spiking to 10-month highs back in March. Indeed, the London-based digger said that the asset had the potential to make it “a world leader in the fertilizer industry.”

But news released shortly afterwards that the firm would need $3.56bn to get the project off the ground, a sum Sirius Minerals plans to raise through issuing equity and raising debt, prompted investors to stampede towards the exits.

The mining play advised last month that pre-tax losses clocked in at £7m for the period to March 2016, not a surprise given that it’s yet to generate any revenues.

And the City expects losses to widen over the next few years as it attempts to get production up and running — indeed, Sirius Minerals is anticipated to see a loss of £66.7m for 2016 scream higher to £74.3m and £142.2m in 2017 and 2018, respectively.

Not only does Sirius Minerals face near-term obstacles to fund its polyhalite project, but the supply/demand imbalance washing over the potash market — not to mention the aforementioned unpredictability related to mining operations — casts further doubts over the company’s ability to flip into the black beyond the next few years.

I believe Sirius Minerals carries unacceptable levels of risk at the present time.

Software struggler

I also believe payment processing play Monitise is currently an unattractive investment destination. The company has remained extremely quiet since announcing in early March it was entering discussions to offload its Markco Media division, a unit it acquired for £55m just two years ago.

There’s already plenty of uncertainty swirling around the future of Monitise as the likes of Apple and Google take a chunk out of the firm’s market share by launching their own mobile payment systems. Card giant Visa has also torn up its relationship with the company as it seeks to go it alone.

Monitise’s customers are also rejecting the firm’s decision to stop developing bespoke applications in favour of generic software solutions, with revenues slumping 21% during July-December, to £33.4m.

The City expects full-year sales to June 2016 to register at £66.3m — down from £89m in 2015 — and to slip again to £64.5m next year, a situation that’s likely to keep Monitise locked firmly in the losses column. Like Sirius Minerals, I reckon the company is a perilous investment destination right now.

The post Why I’d keep on selling Sirius Minerals plc and Monitise plc! appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Apple, and Visa. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Furthermore, ASOS has excellent growth forecasts. It’s expected to grow its bottom line by 24% in the current year and by a further 32% next year, both of which are good enough to significantly improve investor sentiment in any stock. However, with ASOS trading on a price-to-earnings (P/E) ratio of 67, much of this growth appears to already be priced-in. As such, the prospects for major share price gains may be somewhat limited, with ASOS’s margin of safety being rather narrow and indicating that its downside could be greater than its medium-term upside potential.

Elusive profits

Also having the potential to disappoint in future are shares in mobile payments solution specialist Monitise (LSE: MONI). Under its new management team Monitise seems to be making strong progress and is now a better business than it previously was. And as ever, it has an excellent product and some blue-chip client names that shows its offering is very sound.

The problem is that Monitise is still not a profitable entity and with the mobile payments space constantly changing at a rapid pace, a new technology or product could begin to dominate in the coming years. Therefore, Monitise doesn’t seem to be ‘making hay while the sun shines’ and with it failing to find a buyer during its recent strategic review, the outlook for the company remains relatively challenging. With the FTSE 100 offering good value for money, Monitise may struggle to keep up with it in the coming years.

Quad-play quandary

Similarly, BT (LSE: BT-A) could also disappoint versus the FTSE 100. It has embarked on a highly ambitious strategy that’s seeing it attempt to dominate the quad-play space. This requires huge investment in sports rights, broadband capabilities as well the acquisition of EE. Such major changes to any business will cause the risk of failure or delay to rise and this could have a negative impact on BT’s share price.

In addition, the quad-play space has been built up as a major opportunity for incumbents such as BT, since cross-selling opportunities are set to be significant. However, with greater competition from rivals, pricing could come under pressure and this has the potential to hurt BT’s profitability. With BT set to increase its bottom line by just 1% this year, its P/E ratio of 13.9 could begin to look a touch high in the coming months.

The post Why BT Group plc, ASOS plc and Monitise plc are set to underperform the FTSE 100 appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

With McColl’s trading on a price-to-earnings (P/E) ratio of just 10.9, it appears to offer excellent value for money. As such, a bidder could buy the company with a significant margin of safety, thereby increasing the appeal of McColl’s at the present time.

Path to growth

Similarly, Rolls-Royce (LSE: RR) could also be a bid target, with the defence and aerospace company having a very lucrative operation despite recent challenges. Under its new management team, Rolls-Royce has a clear path towards growth and with its bottom line due to rise by 32% next year, it appears to be on track to deliver improved performance.

Furthermore, with the US economy moving from strength to strength, the outlook for the wider defence sector is rapidly improving. This could convince a potential suitor to acquire Rolls-Royce ahead of what could be a purple patch for the industry.

Value for money

Also in the midst of a turnaround is Imagination Technologies (LSE: IMG). It was in talks recently with Apple concerning a potential takeover and while they didn’t come to fruition, Imagination Technologies remains cheap and the company also has a bright future.

Under a new leadership team, it’s possible for the company to turn its financial performance around. Like Rolls-Royce, strong earnings growth is forecast for Imagination Technologies next year, with the company expected to grow its bottom line by 40%. And with it trading on a PEG ratio of just 0.6, it seems to offer excellent value for money, thereby making it a potential bid target for a sector peer.

Watch and wait

Meanwhile, Monitise (LSE: MONI) may prove to have less of a chance of being bought than McColl’s, Rolls-Royce and Imagination Technologies. That’s at least partly because the mobile payments solutions provider is struggling to turn a great product into a great business, with Monitise still being in the red, despite winning major clients and having a top-notch product.

Looking ahead, the payment technology space is likely to change at a rapid rate and while Monitise’s offering may be popular now, there’s no guarantee that will be the case in the coming years. As such, potential suitors may develop their own in-house capabilities or else look to partner with other companies, given the relatively high capital demands of such an offering. Therefore, while Monitise could turn its fortunes around, it seems to be a stock to watch rather than buy for potential acquirers and investors alike.

The post Are Takeovers Imminent For Monitise Plc, Rolls-Royce Holding PLC, Imagination Technologies Group plc And McColl’s Retail Group PLC? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of Imagination Technologies and Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.