Ingenico : A structurally high free cash flow, which should limit afterwards the impact of potential new acquisitions
We are publishing an update on the group, ahead of an Ingenico credit lunch that we are organising in Paris on 22 March. - We are maintaining our Stable credit opinion on the company: the group should continue to post a solid growth profile with organic sales progression close to 10%. In addition, profitability is expected to improve over the next few years. Although the M&A risk is real (and thus integrated in a rather conservative way in our estimated rating), the group's strong free cash flow generation should allow it to quickly reduce its debt after potential acquisitions. - We are reiterating our Buy recommendation on the 2021 straight bonds, which are trading on an asset swap spread of about 117bp, while the average for non-rated bonds with an estimated rating of BBB- is around 100bp (a fairly significant standard deviation, however, with a range of 63bp to 165bp). Moreover, Ingenico bonds (asw+117bp) offer a pick-up of around 60bp vs. a sample of peers officially rated BBB- by the agencies (around 60bp on average). - Finally, we remain at Neutral on the 2022 OCEANE bonds: the latter continue to trade with a very high implied volatility of 35% (based on a theoretical credit spread that we estimate to be 125bp and a borrow cost of 25bp), while a more normative volatility on the share would be between 25% and 30%. The implied volatility has always been very high since the issuance of this instrument. Note that our equity analyst has a Neutral recommendation on the share with a target price of € 92 (vs. a current stock price of around € 88). - >Support factors - - The world leader in Electronic Payment Terminals (EPT).- Expected growth in non-cash transaction volumes.- Strong concentration of the EPT market and significant barriers to entry.- Very good geographical diversification.- Excellent operating track record: sales more than doubled in five years and growing EBITDA margin which now exceeds 20%.- Structurally high free cash flow generation and currently low leverage.Points to watch - - Disappointing operating results in the US and Brazil.- Significant M&A risk (see the acquisition of GlobalCollect in 2014 and the planned acquisition of Worldpay in 2015), but Ingenico has, instead, targeted moderate-sized operations in the last two years.- No covenant on the syndicated credit facility since December 2016 and no official objective for the financial structure.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..
Oddo Securities provides securities brokerage and research services. The company offers equity, economic, and derivatives research and credit analysis services. It focuses on insurance, automotive, building materials, pharmaceuticals, telecommunications, information technology, and agri-food industries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.