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Planet Payment (LON:PPT) report: Q3 results encouraging

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

- Planet Payment has announced Q3 results this morning.

- These show an improving trend with revenue growth of 32% vs Q3’09 to $15.5m, though Q3 was affected by the Visa moratorium on providers’ forex transactions and so was only 7% ahead vs $14.5m in Q2. The key multi-currency revenue was up 47% vs Q3’09 to $12.5m and by 8% vs Q2. Adjusted EBITDA was $0.4m for Q3 vs $0.2m in Q2 and a loss of $0.6m in Q1. These figures were behind our forecast of $17.5m of revenue and $1.4m of EBITDA. However, the run rate going into Q4 looks strong.

- The group has seen good rollout of new merchant locations with its 46 banking and processing customers adding 3,800 active merchant locations in its 16 countries in the last 12 months, an increase of 39%.

- During Q3, the group activated over 1,600 new merchant locations in the eight new countries it has entered this year – Canada, the United Arab Emirates, Philippines, Singapore, Brunei, Sri Lanka, the Maldives and South Africa, taking the total to just under 10,000.

- On forecasts, we will probably trim our current year EBITDA estimate to around $3m, reflecting the Q3 shortfall but more importantly that the volume and margin run-rate going into Q4 supports our numbers. Similarly, we will probably leave our 2011 forecast in tact, as it is supported by the expected Q4 run-rate.

- The lifting of the Visa moratorium in early October is a material positive, as is the recent placing which raised $6m and which will allow the company to repay the $4m loan note which falls due at November 30th. The opportunity to launch in Latin America post the Visa announcement provides significant potential upside but, in any event, the EV/EBITDA for 2011 is less than 7x.