ord minnett report out dated 17 aug

Cut and paste - its the intro only. Whole report is 9 pages which I'm not adding in but should be available from OML on request. DYOR :-)


Source: Ord Minnett - Authors Name: Martyn Jacobs
Title: Senior Research Analyst
Email: [email protected]



On track for stellar FY10
􀂃 CUS reported NPAT of $6.2m after significant items, well above our forecast.
The normalised NPAT result of $10.7m was still a healthy 22% above our
forecast. The underlying EBITDA result was $24.8m, 2.7% ahead of our
forecast. This was CUS’ maiden profit and it shows very positive signs, after
years of making losses. There was no dividend, but the maiden dividend is
expected this half. There is also likely to be a capital return in the near term
􀂃 The result was fundamentally driven by the introduction of direct charging on
3/3/09 and influenced the result for the last four months of 2H09.
Subsequently, 2H09 EBITDA was three times that of 1H09. The run rate for
those four months was ~$4.2m. OML forecast for 1H10 implies a run rate of
$5m per month. The run rate is still rising as the pricing change continues to
wash through the results and various efficiency measures have their
respective impact
􀂃 Cash flows are improving rapidly and debt reduction is progressing at a
pleasing rate. CUS is fast becoming a strong cash cow
􀂃 The outlook is bright for CUS in the core business. A combination of
transaction volume recovery at better than expected rates, an ATM roll out at
faster than expected rates and the potential for an across the board ATM fee
rise places a reasonable degree of upside earnings risk
􀂃 Upside earnings risk may also come from other sources including; branding
and advertising deals; providing a range of services to financial institutions,
opening up the lucrative New Zealand market; and potentially some small
accretive acquisitions
􀂃 Despite the bright outlook for CUS, we are leaving our forecasts in place
which have been top of the market since initiation. The potential for upgrades
exist later in the year. OML has slightly increased its DCF valuation to $3.20
but we think there is potential for >$4.00 as the market begins to ratchet up
earnings multiples applying to the stock over the medium term
􀂃 Investors can look forward to a strong year with low risk and meaningful
share price appreciation as the market continues to re-rate the stock. BUY