Outlook: Focus shifts to integration

H115 results confirm that business continues to be strong, and with the Skrill acquisition complete, the focus shifts to execution of targeted cost synergies and exploitation of the group’s broader reach. With a more balanced geographical and customer mix and operating in a structural growth industry, key to Optimal’s success will be the ability to develop innovative services to keep ahead of larger payment industry peers.

Flash note: H115 trading in line; acquisition on track

Optimal has confirmed that trading in H115 was strong and in line with expectations. Depending on the timing of regulatory approvals, the Skrill acquisition is likely to complete at end July/early August. On our illustrative estimates for the combined Optimal/Skrill business, the stock is trading on a FY16e P/E of only 10.7x, at a significant discount to its peer group. We would expect this discount to start to close on completion of the deal and as Optimal moves to a main market listing, and ul...

Update: Skrill completion moves a step closer

Optimal has raised proceeds of £452m from the rights issue. The Skrill acquisition is on track, with completion expected in early Q315, and we believe there is a strong likelihood of the stock joining the FTSE 250 later in Q3. On initial calculations, the combined group looks set to grow revenues to $800m and EBITDA margins to 30% by FY16 as cost synergies are realised. The stock is trading at a discount to peers based on our initial illustrative estimates for FY16.

Institutional Comment: Daily comment

Update: Skrill – a transformational acquisition

Optimal has announced that it plans to acquire Skrill for €1.1bn. The acquisition will create a business with a comprehensive offering of payment solutions and annualised revenues in excess of $700m. The combined entity will have a more diversified customer base, both geographically and by vertical. The deal is being funded through a combination of a rights issue, equity to the selling shareholders, and debt. Management has identified cost synergies and expects the deal to be earnings accretiv...

Update: Trading in line

Optimal expects to report FY14 revenues and EBITDA in line with market expectations; lower than expected tax should result in earnings materially above market expectations. The underlying business continues to perform well, bolstered by the US STP acquisitions in July, providing strong foundations for growth in FY15 and beyond. The stock trades at a discount to peers despite strong forecast revenue and earnings growth.

Institutional Comment: Daily comment

Update: Fundamentals intact

Optimal has confirmed that strong trading has continued in H214 to date, and expects to report FY14 results in line with market expectations. With the company having provided further clarity on the CEO’s equity-backed loan, in our view Friday’s share price decline seems overdone. Based on strong trading and the risk from exposure to its largest customer starting to reduce, we continue to see scope for further upgrades to forecasts.

Institutional Comment: Daily comment

Update: Strong momentum continues

After another strong six months, boosted by the World Cup, Optimal expects to beat expectations for FY14. We have revised our estimates to reflect stronger growth in both SV and STP in FY14 and FY15. Aside from strong trading within the existing customer base, Optimal has potential to drive further upside with the launch of its merchant-acquiring services in Europe (likely FY15 impact) and via stronger growth from its recent US STP acquisitions.

Update: Growing US presence

Optimal has announced plans to acquire two US-based payment processing businesses for up to $225m. The deals should significantly strengthen Optimal’s presence in the US and fit with the company’s strategy of increasing the geographical coverage of its STP business. We estimate that the combined deals are earnings accretive, even without the inclusion of any cost synergies.