Market trends in favour of online players for longer
In this update, we discuss: 1/ the coronavirus impact on the cash-to-digital transition, notably as contactless payment limits have been increased, 2/ the penetration of online payments, 3/ the impact these trends have had on valuation levels in Europe and the US, 4/ our adoption of a multi-dimensional beta methodology, and its impact on our fair values.The coronavirus outbreak is merely accelerating already visible trends in the payments market. However, we estimate the cash-to-digital transition was already expected, and its acceleration is not as crystal clear as it may seem. However, the online market stands to be the big winner of the current environment.
The acceleration of those trends has contributed to a strong expansion of valuation multiples, especially for the stocks exposed to the online market, such as Adyen and Paypal. Given the current macroeconomic backdrop, we continue to believe that these companies (and Wirecard) are better placed than their counterparts.
This has led us to reassess how we estimate the beta in our coverage universe and we have now adopted a multi-dimensional approach that takes account of four families of criteria: market trends, strategy & business model, shareholder friendliness and governance.
In the end, we continue to favour Adyen’s combination of operational excellence, and perfect position to benefit from the aforementioned trends. Buy rating reiterated and fair value increased to EUR1,530. Wirecard is also well positioned, and we believe its current valuation reflect too strong a probability that its accounts have been fiddled. Buy rating also reiterated, but fair value down to EUR190.
Ingenico Group is a business technology company, operating in 125 countries. Co. designs, develops and supplies payment terminals, offering mercantile payment solutions, cross-border and global payment services and certified global service platform. Co.'s services are done around Payment terminals and software; Terminal estate management, security application updates; Connectivity ensuring the terminal-to-bank host connection; Full after-sales service taking charge of every phase in the lifecycle of terminals and software; 24/7, from installation, maintenance & repair to upgrades; Centralization of transactions; End-to-end security - from terminal to bank or processor..
Wirecard is engaged in the business of global payment processing, risk management and payment acceptance, as well as card issuing. Co. operates in three segments: Payment Processing & Risk Management, which comprises of products and service for the acceptance or implementation and the downstream processing of electronic payments and the associated processes; Acquiring & Issuing, which includes acceptance (acquiring) and issuing credit cards and prepaid cards, as well as account and payment transaction services; and Call Center & Communication Services, which comprises all of the products and services that address the call centre assisted support of corporate and private customers.
Worldline is a financial transaction processing company based in France. Co's operations are organized along three segments covering payments and digital services: Merchant Services & Terminals (facilitating consumer engagement around end-to-end e-payment transactional services on any device – before, during and after the point of sale); eMobility and eTransactional Services (assists businesses and governments in developing new digital services enabling strategic digital transformation); and Financial Processing & Software Licensing (provides processing services to banks and financial institutions for managing card-based and online cashless payments).
Since 1996, Bryan, Garnier & Co has been growing with an absolute conviction that the investment banking landscape would experience a major revolution: most of the large local generalist banking groups will disappear to the benefit of a handful of global powerhouses, and an emerging group of independent, highly specialised boutique investment banks.
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