I got this from Ords Minnett earlier today. Any thoughts anyone?...

I got this from Ords Minnett earlier today. Any thoughts anyone? I have some but I'm waiting to see what some of the other posters have.

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"ok for external distribution

Company name - Customers
ASX Code - CUS
Recommendation - BUY
Risk - Low
Valuation - $3.14

NAB has secured an agreement with CUSCAL to enable NAB customers access to its 1,400 ATMs free of the $2 transaction charge.

CUSCAL is a specialist provider of banking and other financial services to financial institutions, principally the credit union and building society sector.

CUS - Customers, came second in bidding for the CUSCAL business. Winning the CUSCAL business was part of CUS' new growth strategy.

My understanding is the NAB / CUSCAL diminishes CUSCAL revenues by ~$4m pa through NAB customers accessing free ATM transactions through the CUSCAL network.

CUS could still buy the CUSCAL network, but this deal makes CUSCAL less attractive, although still worth buying - it would have to be factored into the price.

CUS are disappointed in missing out, obviously and surprised that CUSCAL were prepared to deal with a major. The culture of CUSCAL, being so strongly aligned to the credit union sector, does not easily mesh with a major bank, so it was considered that CUSCAL would go with an independent. Apparently, CUSCAL appointed a new CEO ~3 months ago and he does not seem to hold the same negative opinion of the major banks as the rest of the organisation.

My understanding is that credit union members of CUSCAL are quite upset with the deal, so it remains to be seen whether this deal is successful.

CUS's strategy of managing other networks has been impacted by losing this tender, however, OML's forecasts do not factor any of the new growth initiatives that management have articulated over the last few months. We only forecast the base business and wait to see what CUS come up with in implementing growth initiatives. Subsequently there is no change in forecasts or outlook.

It does appear that CUS have been too confident in public about their future initiatives without securing the major building blocks of the next stage of growth. Although the stock price has not reacted, CUS do need to be careful of the expectations they set for the market.

OML's FY10 forecasts are still in tact and valuations >$3 should be easily attainable on the base business performing following the introduction of direct charging.

Kind regards

Martyn Jacobs
Senior Research Analyst"