ING FP

Publicly traded companies mentioned herein: Ingenico Group SA (ING FP), Pax Global Technology Ltd (327 HK), VeriFone Systems Inc (PAY)

Highlights

The presenter is short shares of Ingenico Group (ING) following “a really great multi-year run that ended in early 2016”. Shares have traded off nearly 30% over the last 12 months, but are down nearly 40% year-to-date. The reason he sees a favorable risk/ reward and is sticking with the short (at ~$73; a $4.5 billion market cap) is: “When things were going about as well as was possible with its point-of-sale (POS) terminal business (and payment services) ING’s management put out 2020 guidance calling for a 13% revenue CAGR (implied 10% organic revenue growth) and margin expansion (to 22-23% EBITDA margins from ~21%); this guidance has to come down”; however, management has yet to adjust the guide in the face of stiff comps and numerous challenges in key markets. Where he believes his point of view is differentiated is in Asia, which is ING’s second largest market outside of Europe and a leading driver of growth. He sees the China market at “developed market penetration levels”; and with other key markets (the US and Brazil) “broken” ING’s EBITDA and EPS multiples should contract. If his thesis proves to be accurate ING’s multiple(s) should decline to where VeriFone is trading, and the stock would settle in the mid-$50s. This could prove to be conservative, as the implied value is based on 10x the 2018 consensus EPS estimate of ~$5.60).