Wameja low-ball takeover by Mastercard

Well done holders of Wameja who held onto this stockĀ and who have received a bidĀ fromĀ Mastercard, albeit at a very low-ball price of 8p, well short of its 20p valuation from FinnCap. That is the price of holding only a minority interest, I guess.

Holders should hold on for the time being for 2 reasons:

  • 1) They won’t lose 0.5p a share as the offer price from market makers is currently 7.5p,
  • 2)Ā  I noted the wording in the RNS today: “In the absence of a superior proposal” the bid has been accepted.Ā There may be a slim chance Visa could come in to frustrate the process and set off a bidding war.

I hope long term holders of WJA as well as readers of my blog made some money out of thisĀ  stock, as Wameja wasĀ mentioned onĀ Safestocks as a takeover play.Ā However, it would be remiss of me not to acknowledge that FinnCap analyst Lorne Daniel put me onto it with his excellent analysis.

Lessons for Seeing Machines

There are lessons from this forĀ private investors (and even management) in Seeing Machines, I believe.

Firstly,Ā Lombard Odier, which holds 23.45% has accepted the Wameja offer.Ā I do hope Seeing Machines is eventually taken out at a healthier premium. However, at its current price it remains vulnerable, particularly as Lombard Odier, via Volantis 1798, holds a jumbo 19.9%.

This also has lessons for holders of any share; there is an opportunity cost for holding a stockĀ for years and years in the hope of a bumper pay day.

The writer holds stock in Wameja and Seeing Machines.

 

Winner Wameja overlooked in market meltdown

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 inĀ  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.

Wameja overlooked

One of the companies Iā€™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 ā€˜Mastercard Sendā€™ 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: ā€œWe 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 ā€œgood, solid, steady performanceā€ 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 ā€“ based on HomeSend ā€“ for their business to consumer card disbursements in the US on an exclusive basis.ā€

He then concludes: ā€œCross border remains a key area of growth for the US financials giant. Mastercard shares currently trade on a multiple of 28x 2022E earnings. Wamejaā€™s share of the HS earnings in that year would be ā‚¬3.6m, valuing that stake on simply financial benefit at over ā‚¬100m or Ā£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 Wamejaā€™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.ā€

In spite of volatile marketsĀ  I expect this to be bought this year for at least Lorneā€™s Danielā€™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.