Shares in Travelex owner Finablr PLC (LON:FIN) moved higher on Tuesday as JPMorgan Cazenove and Barclays began coverage of the UAE-based payments and bureau de change group.
When it floated in May, Finablr was forced to slash the pricing of its offer to 174p per share from the initial 210p-260p range at a cut-price, and, not helped by a modest trading update for Travelex, has since seen its shares sink below 135p this month.
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But analysts at both banks saw value in the triple offer of B2B payment technology, consumer cross-border payments and bureau de change shops, with Cazenove setting a share price target of 190p and an ‘overweight’ rating, while Barclays set its target at 170p with an ‘equal weight’ rating.
Cazenove, which was a sponsor on the IPO, said that Finablr’s payments and FX platform is underpinned by scalable proprietary technology that “provides a competitive advantage that would take a significant period to replicate” and offers the company the capacity to manage three times its current volumes.
Caz estimates compound annual growth of underlying earnings (EBITDA) of 19% for the period from 2018 to 2021.
At the current share price, Finablr’s fast-growing B2B payment technology business is valued at around a 75% discount to the wider peer group, Cazenove said and the group's valuation “presents attractive risk-reward”.
Barclays calls for patience
Similarly Barclays, which was a joint co-ordinator on the IPO, sees lots to like from Finablr differentiating its offer from peers through its extensive pay-in and pay-out network, licences, technology and the strong consumer brands it owns, which has resulted in large tech businesses increasingly using its services.
With the company guiding to high single-digit revenue growth with EBITDA margin approaching 20% over the medium term, implying high-teens EBITDA growth, Barclays valuation is based on a 12-time 2020 earnings per share “and implying fundamental valuation upside”.
“However, we expect it will take time and a number of positive data points for the market to attribute fair value to the stock,” analysts added, with a likely second-half weighting and a continued lack of clarity around Brexit.
Finablr shares were up almost 3% to 145p on Tuesday morning.