Update: Net 1 UEPS Technologies Earnings - Shares Pop On Beat

Sep. 3.14 | About: Net 1 (UEPS)

Summary

The company crushed earnings consensus by 175% for fiscal 4Q, shares have soared 12% since then.

We still have a bullish thesis on the company as it’s one of the best alternatives to banks.

The recent earnings beat was in-line with our expectations as the company continues to see growth across all segments.

Net 1 UEPS Technologies (NASDAQ:UEPS) posted fiscal 4Q earnings last week of $0.91 a share (topping $0.33 consensus) and revenues were $183 million (besting $143 million consensus). Revenue was up 55% y/y for fiscal 4Q, and up 29% for all of 2014. The company also upped fiscal 2015 guidance, calling for EPS of at least $1.92 a share, compared to consensus of $1.62.

Shares are up 30% since we first profiled Net 1 as a great play on the underbanked market. It's still close to 30% off our $16 a share fair value estimate. Shares are trading at just 12x earnings, well below the 16x it traded at in February. As we noted earlier this year,

The fact remains that Net 1 operates in volatile territories, South Africa and Korea, however these are also a couple of the most underbanked countries in the world. Net 1 has a stronghold in these markets, but still has a large market to tap. As well, we think the company's move to get a presence in more developed markets will help add some stability to margins.

During 4Q its largest segment, South African transactions, brought in revenues of $88.3 million, which was up 52% y/y. The international segment -- mainly consisting of South Korea -- saw revenues up 17% y/y, and its financial inclusion and applied tech segment had revenues up 116% y/y.

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