Barclays Maintains an 'Equalweight' on Total System Services (TSS); Thoughts on Potential Uses of Capital; Possible
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Price: $133.27 --0%
Rating Summary:
15 Buy, 15 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
15 Buy, 15 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Barclays maintains an 'Equalweight' on Total System Services (NYSE: TSS), PT $16.
Barclays analyst says, "During TSS' recent analyst day, management provided a broad view of capital structure opportunities, including potential to lever up to 2.5-3.0x LTM EBITDA (vs. current 0.6x) to pursue capital allocation priorities. Management has signaled a near-term preference for merchant acquiring deals to enhance TSS' longer-term growth profile, while indicating the likelihood of share repurchases should the deal pipeline not play out as desired over the next 60 days."
"Our industry discussions indicate that there may be some opportunities over the next 12-18 months (as some banks could divest non-core merchant acquiring assets to raise additional capital, while some stand-alone acquirers that recently explored a sale may eventually return to the market), although these may take some time to play out. Among the stand-alone acquirers, while public companies trading at valuations above TSS (at 6.6x EV/EBITDA) could potentially be considered expensive at this time, given TSS' track record as a disciplined buyer, potentially meaningful synergies might make a transaction of this size possible. Assuming a potential acquisition is not announced over the next couple of months, we would expect TSS to become more aggressive in using its cash balance ($250 million+) and free cash flow (currently ~$20 million/month, with a FCF yield of 7%) for repurchases, with potential opportunities to use leverage if desired."
"Overall, while fundamental growth drivers underlying TSS' issuer processing and merchant acquiring businesses continue to suggest that shares are fairly valued, we believe capital structure opportunities may present a near-term catalyst for shares."
For more ratings news on Total System Services click here and for the rating history of Total System Services click here.
Shares of Total System Services closed at $17.76 yesterday.
Barclays analyst says, "During TSS' recent analyst day, management provided a broad view of capital structure opportunities, including potential to lever up to 2.5-3.0x LTM EBITDA (vs. current 0.6x) to pursue capital allocation priorities. Management has signaled a near-term preference for merchant acquiring deals to enhance TSS' longer-term growth profile, while indicating the likelihood of share repurchases should the deal pipeline not play out as desired over the next 60 days."
"Our industry discussions indicate that there may be some opportunities over the next 12-18 months (as some banks could divest non-core merchant acquiring assets to raise additional capital, while some stand-alone acquirers that recently explored a sale may eventually return to the market), although these may take some time to play out. Among the stand-alone acquirers, while public companies trading at valuations above TSS (at 6.6x EV/EBITDA) could potentially be considered expensive at this time, given TSS' track record as a disciplined buyer, potentially meaningful synergies might make a transaction of this size possible. Assuming a potential acquisition is not announced over the next couple of months, we would expect TSS to become more aggressive in using its cash balance ($250 million+) and free cash flow (currently ~$20 million/month, with a FCF yield of 7%) for repurchases, with potential opportunities to use leverage if desired."
"Overall, while fundamental growth drivers underlying TSS' issuer processing and merchant acquiring businesses continue to suggest that shares are fairly valued, we believe capital structure opportunities may present a near-term catalyst for shares."
For more ratings news on Total System Services click here and for the rating history of Total System Services click here.
Shares of Total System Services closed at $17.76 yesterday.
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