Compass Point on Financial Technology: Blackhawk Developments (SWY, NTSP, GDOT)
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Rating Summary:
4 Buy, 15 Hold, 0 Sell
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Today's Overall Ratings:
Up: 7 | Down: 14 | New: 26
Rating Summary:
4 Buy, 15 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 7 | Down: 14 | New: 26
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Compass Point on Financial Technology: Blackhawk Developments
Analyst, Douglas Greiner, said, "In a press release issued September 5th Safeway (NYSE: SWY) announced plans to file a registration statement for a potential IPO of a minority stake in the subsidiary Blackhawk Network with timing yet to be determined depending upon market conditions during the first half of next year. In a press release dated August 31st Warburg Pincus announced a minority investment in InComm. The developments center on distribution and technology. NetSpend's (Nasdaq: NTSP) cards are distributed at 130,000 locations and GreenDot's (Nasdaq: GDOT) cards are distributed at 65,000 locations."
"The developments suggest value in prepaid distribution and technology compared to our cautious investment thesis centered on the unfavorable economics of stand-alone active prepaid card portfolios, which remains unchanged. These are the customers the banks don't want. Non direct deposit customers may only use their card once and the average lifetime of direct deposit customers is in the range of 21 months. We view the core recurring value of a prepaid card equal to interchange revenue. Last year GDOT and NTSP generated interchange revenue per active card of $34 and $31, respectively. Assuming such levels produce $10 of both earnings and free cash flow yields value per active card of $50-$100 based upon an IRR of 10-20%. Current enterprise value per active GDOT and NTSP card is $64 and $348, respectively."
Analyst, Douglas Greiner, said, "In a press release issued September 5th Safeway (NYSE: SWY) announced plans to file a registration statement for a potential IPO of a minority stake in the subsidiary Blackhawk Network with timing yet to be determined depending upon market conditions during the first half of next year. In a press release dated August 31st Warburg Pincus announced a minority investment in InComm. The developments center on distribution and technology. NetSpend's (Nasdaq: NTSP) cards are distributed at 130,000 locations and GreenDot's (Nasdaq: GDOT) cards are distributed at 65,000 locations."
"The developments suggest value in prepaid distribution and technology compared to our cautious investment thesis centered on the unfavorable economics of stand-alone active prepaid card portfolios, which remains unchanged. These are the customers the banks don't want. Non direct deposit customers may only use their card once and the average lifetime of direct deposit customers is in the range of 21 months. We view the core recurring value of a prepaid card equal to interchange revenue. Last year GDOT and NTSP generated interchange revenue per active card of $34 and $31, respectively. Assuming such levels produce $10 of both earnings and free cash flow yields value per active card of $50-$100 based upon an IRR of 10-20%. Current enterprise value per active GDOT and NTSP card is $64 and $348, respectively."
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