Thread by @SharogradskyM

I promised to prepare few threads about Israeli companies so I want to begin with the one of the rarest 💎 at Israel stock exchange: Symbol at IBRK: $SHVA.TLV Reports at English could be found under IR at Shva.co.il

Shva is almost a monopoly, the company is a payment transaction business located in Israel which collects a toll for every credit card transaction (also Apple Pay, Google Pay…) via its terminals and SAAS like revenue for leasing and managing its POS terminals.

Company was founded by Israeli banks. Durning2018, pre IPO, Visa and Mastercard both bought a 10% stake in the company instead of competing against it.
At 18NIS per share SHVA market cap is 720M’NIS with 160M’NIS of net cash at balance sheet. —->>

So for EV of 560MNIS and 2021 Estimated EBIT of 40M, SHVA trades at a ridiculous valuation for a fintech payments company of EV/EBIT =14. During the last three years, SHVA compounded its revenue at 12% and EBIT compounded at 30% per year due to operating leverage.

Comparable companies such as First Data (prior to acquisition), Fiserv, Global Payments, and Worldline trade at 20-27x EBIT, the Tel Aviv Stock Exchange at 30x, and Visa and Mastercard at 35x. Shva is not an inferior business than any of these benchmark companies.
—->>>

Growth Drivers 🚀: Based on our analysis, the tariff Shva charges per transaction from its customers is 60-70% lower in comparison to other developed countries, and we see significant room to increase prices. —>>

✅Till the end of 2021 All terminals should be upgraded to EMV that requires pin code insertion above 300NIS transaction), which will lead to 25% revenue increase at SAAS like revenue.
✅Israeli market re-opened at Q2 and credit cards transactions rose sharply last months

✅ Cashless payments in Israel are still very low in comparison to other developed countries, and have huge room for growth with Apple&Google pay penetration.

👉 Inflection Point:
Eitan Lev-Tov is appointed as SHVA new CEO effective on July 1 2021. Eitan brings extensive background from platforms business improvement since he was CEO of Cibus (payments and special offers from restaurants) —>>>

and successfully transformed the company to a market leader. We verified that Eitan is already working on high margin new services which will transform Shva into a leading Fintech payments company in Israel. One of executives we spoke with last week described Shva’s position as :

“Right now SHVA is at kinder garden regarding services it proposed to its customers, and Eitan plans to take to a PhD level” We think that the markets missed the situation at SHVA, with the high potential for growth acceleration and penetration to new verticals.

Summary
At 2021E EV/EBIT of 14 SHVA is ridiculously priced, in contrast to its quality. The opportunity exists due to limited liquidity since big banks and Visa & Mastercard hold 60% of the float and shares trade around 250USD$K per day.

The company doesn’t have any analyst coverage in Israel, and big institutions may have difficulties to build a position.
At a more reasonable valuation, growth acceleration and new services initiation we see SHVA shares a good candidate to double during the next 12 months.

#Ihaveposition #Notrecommendation #DYODD