Net 1 Ueps Technologies, Inc. (UEPS)

CAPS=5S
DFA6M= 0.10%

mf

UEPS is already the standard in South Africa for cashless transactions and has the potential to become the standard for all developing economies. Their EasyPay merchant processing network processes 60-65% of SA's total retail volume, worth $3.7B last year.

Net1 has great margins (38% operating, 35% profit) and are diversified into fee-based services (60% of revenue), financial services, hardware and software, and smart card accounts. With their acquisition of BGS Smartcard Systems last year, they now have established operations in Russia, Ukraine, Uzbekistan, India, and Oman in addition to their existing operations throughout Africa and the Middle East.

My earnings growth-based and free cash flow discount valuation models suggest that Net1 is selling at a deep discount, and with a potential market of 4 billion unbanked people in the world and no significant direct competitors, they have plenty of room left to grow.

Solid Quarter -- Fundamental EPS of $.45 vs street est of $.43 (Gaap eps of $.37 includes acquired asset intangible amortization); EBITDA of $33.3M; EBITDA Margin of 50.8%!..Enterprise value less Cash / Annualized Ebitda = 5.17; Cash Generation of $37M;

Solid execution translated to margin expansion and continued strong cash generation. Cash generation of this firm is very impressive. At the current rate, this firm could have enough cash to buy back all outstanding shares at the current market price in less than 5 years!!!!!

I look forward to hearing more strategic commentary on future growth opportunities, emerging countries, & guidance on use of cash (acquisitions, additional stock repurchase, etc.)...

Joel Greenblatt Pick

great balance sheet, excellent return on investments, this company sells a very useful product and other countries will realize that

Lots of growth potential, not to mention the world cup is in South Africa next summer. Will be a huge influx of money in the economy. Earnings growth for next 12 months will be exponential.

A modified "PayPal-esque" company for the developing world. If this isn't enough to to pique your interest, then look at their website, financials, and structure. In my opinion, this company has a great opportunity for growth....and very little competition.

Niche business and a play on Africa

I'm sold on their business model. Also looks like a great price to get in at.

Look at the 3 month chart... it has found support at:
12.32, 12.53, 12.39, 12.22, and 12.28.

The current price: 12.60
That means there is only 3% downside to its lowest support level in the last 3 months... (12.22). With this decent support level, you get a business with great growth--- for cheap. I like it.

It looks undervalued to me. The big risk here is instability in a somewhat unstable South Africa, but the potential reward seems to me to be worth that risk. Only time will tell.

Good Technology, good price, in next few years big growth potential to the rest of the third world, safer and more accessible than credit cards. This is how everyone should be making transactions, not just South Africa.

Shadowing Ten Miles on this. Did independent research and found that company's product makes sense because it is like cash (in the sense that there is no need to be connected online- you just need a smart card reader), but it is better than cash for many purposes because it is almost completely secure from theft and fraud because (1) fingerprints are used to verify each transaction and (2) there is an audit trail that needs to match from the transferor's card and the recipient's card. Thus, we have something that is better than cash except for the fact that you need a smart reader. This objection has been successfully overcome in South Africa. Now we will see what the rest of world thinks.

Too much dependence on SA government--will need more diversity. I’ve been in & out of this in RW for that reason. I agree ownership is the key; I’m sure management doesn’t want all this “golden egg” in a single basket. Hopefully, they’re working diligently on alternative “initiatives”. Maybe adding more “Quail Eggs” will help shore up the one the goose laid. With the bulk of revenue coming from one single source gives chance for the “SGA” to bark orders and dictate—and that my fellow fools is volatile. Also, this is a “perfect” acquisition candidate and would be a smart purchase for a company like Visa. If “UEPS” can’t diversify then maybe a company “like” Visa can, after all-- almost 2/3 of the world’s population is a candidate for UEPS technology—“Smart Card”.

Succinctly: small cap, smart card, smart buy. A lot to like here – company provides universal electronic payment technologies to developing markets. Concentration risk with three quarters of business through South African govt at present, but diversification initiatives under way. Insiders own roughly 20% of business. Gets jacked around a bit by the RAND, but overall shows nice long term top and bottom line trends. Low debt, high ROE, attractive forward p/e – consider this a decent long term growth story trading like a value story – likely to outperform broad averages from here over the next several years

Target price of $54.23

Lynch style

UEPS is bringing Twenty-First century technology to undeveloped areas of the world. Its universal payment systems are being used by governments as payment systems. Its success is dependent upon contracting from governments, but its benefits to the governments and the people it serves outweigh the cost to implement the system. And once in place, the system continues to pay for itself. UEPS will continue to grow and put in place its systems. Further, they have the ability to help companies pay employees via electronic payments rather than the costly system of paying workers weekly with cash.