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Global Axcess Corp (GAXC): It’s Cheap, I'm a Buyer and This is Why

|Includes:CATM, Outerwall Inc. (OUTR)

Global Axcess Corp (OTC:GAXC) is currently trading at 4x Operating Cash Flow, 10x 2009 EPS est (0.075 EPS), and 5x my 2010 EPS estimate (0.155 EPS).  If you take out the onetime charge in Q1 2009, GAXC is actually trading closer to 8x TTM EPS.  The stock is dirt cheap at 80c, and I will continue to add to my mountain of shares.  The company operates ~4,500 ATM throughout the US, and recently announced a plan to rollout a DVD kiosk offering to new and existing customers (similar to RedBox).

Peer Analysis:

CardTronics (sym: CATM), the largest publicly traded ATM provider, recently received a glowing review in Investor’s Business Daily.  CATM is expected to show 30% EPS growth 2009/2010. CATM currently trades at 17x 2009 EPS est (0.64 EPS), and 13x 2010 EPS est (0.85 EPS).

Coinstar (sym: CSTR), the largest publicly traded kiosk operator and owner of RedBox DVD Kiosks, is a very hot story over the last year.  CSTR is expected to show 67% EPS growth 2009/2010.  CSTR currently trades at 28x 2009 EPS est (0.96 EPS), and 17x 2010 EPS est (1.57 EPS).

Global Axcess (sym: GAXC), an ATM provider and recently announced DVD kiosk operator is expected (I’m expecting) to show 100% EPS growth 2009/2010.  GAXC currently trades at 10x 2009 est (0.075 EPS), and 5x 2010 EPS est (0.155 EPS).  My 2010 estimate accounts for 10% ATM growth and a DVD rollout on par with the company’s expectations. I believe my estimates for 2010 could be too conservative as they don’t account for potential new ATM or DVD business over and above what has already been announced.

Conclusion:

When I first bought shares and posted my initial write-up I thought I was a couple months early, but being early didn’t bother me since I wanted to pick up a meaningful position.  I try to find companies like GAXC as close to the inflection point as possible, and I believe that point in time is coming quickly. I’m fairly confident the company is going to have a very active Q1 2010 which is going to put the company on the map, and lead to considerable multiple expansion.   The company also has over $20 million in NOL’s, so they won’t be paying taxes anytime soon.  I’m expecting GAXC to show ~100% EPS growth in 2010, so when trying to value where shares could be headed, use a 20 PE to start.  I've been a buyer recently with a 74c Avg on my shares.

 






Disclosure: LONG GAXC
Stocks: OUTR, CATM