Finally, the market is starting to wake up to the fact that stock markets are over-valued. It could be said that the Emperor (I have this crazy image of Donald Trump in my mind) has sneezed and people can finally see he is sick and stark naked. Unfortunately, even when the Coronavirus scare is over he will still be naked, whatever he does with those golden locks of his.
What should investors do? Hold their nerve and go for value, not stocks pumped up on false expectations. A competent, trustworthy management is also key.
One of the companies I’m keenest on is Wameja. Under the skilled management of John Conoley it has made the transition to a fintech in the lucrative payments space. It has a 35.68% stake in a global platform called Homesend, which is used by Mastercard under the name ‘Mastercard Send’ as a cross-border payments platform.
This platform is used by Paypal and Bank of America, as well as dozens of other banks in a multi-trillion dollar market. Volumes are starting to ramp up as is clear from the latest set of Key Performance Indicators.
Lorne Daniel, Director of Research at house broker FinnCap, has previously written how it is has effectively been de-risked as an investment. In his latest note, published today, he writes: “We continue to see this business as hugely valuable to Mastercard. Its recent Q4 results revealed that cross-border volumes were up 16%, continuing a trend of mid-teen% growth, and representing revenue of $1.4bn (of a $4.4bn total). In an analyst call, Mastercard management said it sees double-digit cross-border growth across most of its regions. And had “good, solid, steady performance” coming out of the US. In Middle East, Africa, and Asia Pacific it continues to see solid growth. It also noted Bank of America will now use Mastercard Send – based on HomeSend – for their business to consumer card disbursements in the US on an exclusive basis.”
He then concludes: “Cross border remains a key area of growth for the US financials giant. Mastercard shares currently trade on a multiple of 28x 2022E earnings. Wameja’s share of the HS earnings in that year would be €3.6m, valuing that stake on simply financial benefit at over €100m or £85m. Beyond that, there is the value of full control over a key element of its digital money strategy as well as greater confidentiality (since Wameja’s public listing somewhat exposes HS performance). We remain confident that Mastercard will bid a substantial sum for that stake, whether or not it is the final buyer.”
In spite of volatile markets I expect this to be bought this year for at least Lorne’s Daniel’s price target of 20p, perhaps significantly higher.
Of course, I could be wrong so any investor should do their own research.
The writer holds stock in Wameja.