Intrinsic value of Net 1 UEPS Technologies, Inc. - UEPS

Previous Close

$4.05

  Intrinsic Value

$17.83

stock screener

  Rating & Target

str. buy

+340%

Previous close

$4.05

 
Intrinsic value

$17.83

 
Up/down potential

+340%

 
Rating

str. buy

We calculate the intrinsic value of UEPS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  625
  640
  656
  675
  695
  717
  742
  768
  797
  827
  860
  895
  932
  972
  1,014
  1,058
  1,105
  1,155
  1,207
  1,263
  1,321
  1,383
  1,448
  1,517
  1,589
  1,665
  1,745
  1,829
  1,918
  2,011
Variable operating expenses, $m
  524
  535
  548
  562
  578
  596
  614
  635
  657
  681
  664
  691
  720
  751
  783
  817
  854
  892
  933
  975
  1,021
  1,068
  1,119
  1,172
  1,227
  1,286
  1,348
  1,413
  1,481
  1,553
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  524
  535
  548
  562
  578
  596
  614
  635
  657
  681
  664
  691
  720
  751
  783
  817
  854
  892
  933
  975
  1,021
  1,068
  1,119
  1,172
  1,227
  1,286
  1,348
  1,413
  1,481
  1,553
Operating income, $m
  101
  104
  108
  112
  117
  122
  127
  133
  140
  147
  196
  204
  212
  221
  231
  241
  251
  263
  275
  287
  301
  315
  329
  345
  362
  379
  397
  416
  436
  458
EBITDA, $m
  162
  166
  170
  175
  180
  186
  192
  199
  206
  214
  223
  232
  242
  252
  263
  274
  286
  299
  313
  327
  342
  358
  375
  393
  412
  431
  452
  474
  497
  521
Interest expense (income), $m
  4
  11
  13
  16
  19
  23
  27
  32
  37
  42
  48
  54
  61
  68
  75
  83
  92
  101
  110
  120
  131
  142
  154
  166
  180
  193
  208
  223
  240
  257
  274
Earnings before tax, $m
  90
  91
  92
  93
  94
  95
  96
  97
  98
  99
  142
  143
  144
  146
  147
  149
  151
  153
  154
  156
  159
  161
  163
  166
  168
  171
  174
  177
  180
  183
Tax expense, $m
  24
  25
  25
  25
  25
  26
  26
  26
  26
  27
  38
  39
  39
  39
  40
  40
  41
  41
  42
  42
  43
  43
  44
  45
  45
  46
  47
  48
  49
  49
Net income, $m
  66
  66
  67
  68
  68
  69
  70
  71
  71
  72
  103
  104
  105
  106
  108
  109
  110
  111
  113
  114
  116
  117
  119
  121
  123
  125
  127
  129
  131
  134

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,243
  1,272
  1,304
  1,341
  1,382
  1,426
  1,475
  1,527
  1,584
  1,645
  1,710
  1,779
  1,853
  1,932
  2,015
  2,103
  2,197
  2,296
  2,400
  2,510
  2,627
  2,750
  2,879
  3,015
  3,159
  3,310
  3,469
  3,636
  3,812
  3,998
Adjusted assets (=assets-cash), $m
  1,243
  1,272
  1,304
  1,341
  1,382
  1,426
  1,475
  1,527
  1,584
  1,645
  1,710
  1,779
  1,853
  1,932
  2,015
  2,103
  2,197
  2,296
  2,400
  2,510
  2,627
  2,750
  2,879
  3,015
  3,159
  3,310
  3,469
  3,636
  3,812
  3,998
Revenue / Adjusted assets
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
Average production assets, $m
  198
  202
  207
  213
  220
  227
  234
  243
  252
  261
  272
  283
  295
  307
  320
  334
  349
  365
  381
  399
  418
  437
  458
  479
  502
  526
  551
  578
  606
  635
Working capital, $m
  101
  103
  106
  109
  112
  116
  119
  124
  128
  133
  138
  144
  150
  156
  163
  170
  178
  186
  194
  203
  213
  223
  233
  244
  256
  268
  281
  294
  309
  324
Total debt, $m
  61
  75
  90
  108
  127
  148
  171
  196
  223
  251
  282
  315
  350
  387
  427
  468
  513
  559
  609
  661
  716
  774
  835
  900
  967
  1,039
  1,114
  1,193
  1,277
  1,364
Total liabilities, $m
  588
  601
  617
  634
  654
  675
  698
  722
  749
  778
  809
  842
  877
  914
  953
  995
  1,039
  1,086
  1,135
  1,187
  1,242
  1,301
  1,362
  1,426
  1,494
  1,566
  1,641
  1,720
  1,803
  1,891
Total equity, $m
  655
  670
  687
  707
  728
  752
  777
  805
  835
  867
  901
  938
  977
  1,018
  1,062
  1,108
  1,158
  1,210
  1,265
  1,323
  1,384
  1,449
  1,517
  1,589
  1,665
  1,744
  1,828
  1,916
  2,009
  2,107
Total liabilities and equity, $m
  1,243
  1,271
  1,304
  1,341
  1,382
  1,427
  1,475
  1,527
  1,584
  1,645
  1,710
  1,780
  1,854
  1,932
  2,015
  2,103
  2,197
  2,296
  2,400
  2,510
  2,626
  2,750
  2,879
  3,015
  3,159
  3,310
  3,469
  3,636
  3,812
  3,998
Debt-to-equity ratio
  0.090
  0.110
  0.130
  0.150
  0.170
  0.200
  0.220
  0.240
  0.270
  0.290
  0.310
  0.340
  0.360
  0.380
  0.400
  0.420
  0.440
  0.460
  0.480
  0.500
  0.520
  0.530
  0.550
  0.570
  0.580
  0.600
  0.610
  0.620
  0.640
  0.650
Adjusted equity ratio
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  66
  66
  67
  68
  68
  69
  70
  71
  71
  72
  103
  104
  105
  106
  108
  109
  110
  111
  113
  114
  116
  117
  119
  121
  123
  125
  127
  129
  131
  134
Depreciation, amort., depletion, $m
  61
  62
  62
  63
  63
  64
  65
  66
  67
  68
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
Funds from operations, $m
  127
  128
  129
  130
  132
  133
  135
  136
  138
  140
  131
  133
  135
  137
  140
  142
  145
  148
  151
  154
  158
  161
  165
  169
  173
  177
  182
  187
  192
  197
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
Cash from operations, $m
  125
  126
  126
  127
  128
  129
  131
  132
  133
  135
  125
  127
  129
  131
  133
  135
  137
  140
  142
  145
  148
  151
  154
  158
  161
  165
  169
  173
  178
  182
Maintenance CAPEX, $m
  -19
  -20
  -20
  -21
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
New CAPEX, $m
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
Cash from investing activities, $m
  -23
  -25
  -25
  -27
  -27
  -29
  -31
  -31
  -33
  -35
  -36
  -38
  -40
  -41
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -86
  -90
Free cash flow, $m
  102
  101
  101
  101
  101
  100
  100
  100
  100
  100
  89
  89
  89
  89
  89
  89
  89
  89
  89
  90
  90
  90
  90
  90
  91
  91
  91
  91
  92
  92
Issuance/(repayment) of debt, $m
  11
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  88
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  11
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  88
Total cash flow (excl. dividends), $m
  113
  115
  117
  118
  120
  122
  123
  125
  127
  129
  120
  122
  124
  126
  128
  131
  133
  136
  139
  142
  145
  148
  151
  155
  158
  162
  166
  171
  175
  180
Retained Cash Flow (-), $m
  -13
  -15
  -17
  -19
  -21
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -93
  -98
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  100
  100
  99
  99
  98
  98
  98
  97
  97
  97
  85
  85
  85
  85
  84
  84
  84
  84
  84
  84
  83
  83
  83
  83
  83
  83
  83
  82
  82
  82
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  96
  91
  86
  81
  76
  71
  66
  61
  56
  51
  41
  36
  32
  28
  25
  21
  18
  15
  13
  11
  9
  7
  5
  4
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Net 1 UEPS Technologies, Inc. is a provider of payment solutions, transaction processing services and financial technology across multiple industries. The Company develops and markets a transaction processing solution that encompasses its smart card-based alternative payment system for the unbanked and under-banked populations of developing economies and for mobile transaction channels. The Company operates through three segments: South African transaction processing, International transaction processing, and Financial inclusion and applied technologies. The Company also provides secure transaction technology solutions and services, by offering transaction processing, financial and clinical risk management solutions to various industries. It offers secure online transaction processing, cryptography, mobile telephony, integrated circuit card (chip/smart card) technologies, and the design and provision of financial and value-added services to its cardholder base.

FINANCIAL RATIOS  of  Net 1 UEPS Technologies, Inc. (UEPS)

Valuation Ratios
P/E Ratio 3.1
Price to Sales 0.4
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow 2.7
Growth Rates
Sales Growth Rate 3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -69.4%
Cap. Spend. - 3 Yr. Gr. Rate -14.4%
Financial Strength
Quick Ratio 10
Current Ratio 0.9
LT Debt to Equity 1%
Total Debt to Equity 4.7%
Interest Coverage 30
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. 6.5%
Return On Total Capital 10.5%
Ret/ On T. Cap. - 3 Yr. Avg. 14.1%
Return On Equity 11.2%
Return On Equity - 3 Yr. Avg. 15.7%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 52.1%
Gross Margin - 3 Yr. Avg. 51.8%
EBITDA Margin 26.1%
EBITDA Margin - 3 Yr. Avg. 28.1%
Operating Margin 15.9%
Oper. Margin - 3 Yr. Avg. 18.7%
Pre-Tax Margin 18.7%
Pre-Tax Margin - 3 Yr. Avg. 20.8%
Net Profit Margin 12%
Net Profit Margin - 3 Yr. Avg. 13.7%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 33.9%
Payout Ratio 0%

UEPS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UEPS stock intrinsic value calculation we used $613 million for the last fiscal year's total revenue generated by Net 1 UEPS Technologies, Inc.. The default revenue input number comes from 0001 income statement of Net 1 UEPS Technologies, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our UEPS stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for UEPS is calculated based on our internal credit rating of Net 1 UEPS Technologies, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Net 1 UEPS Technologies, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of UEPS stock the variable cost ratio is equal to 84%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for UEPS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 21.5% for Net 1 UEPS Technologies, Inc..

Corporate tax rate of 27% is the nominal tax rate for Net 1 UEPS Technologies, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the UEPS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for UEPS are equal to 31.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Net 1 UEPS Technologies, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for UEPS is equal to 16.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $642.519 million for Net 1 UEPS Technologies, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 56.833 million for Net 1 UEPS Technologies, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Net 1 UEPS Technologies, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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