Why Monitise Plc, Paypoint plc And Optimal Payments Plc Can Only Grow From Here

It’s estimated that by 2019, the value of the mobile-based payments will surpass $142bn in volume in the US alone, up from around $50bn currently. And the likes of Monitise (LSE: MONI)Paypoint (LSE: PAY) and Optimal Payments (LSE: OPAY) are going to find it difficult not to profit from this growth. 

What’s more, even though the size of the US mobile-based payment industry is set to nearly triple over the next four years, at its peak mobile payments will only total around 1% of the $16trn US consumer payments market. 

So, Monitise, Paypoint and Optimal aren’t going to run out of customers seeking their services any time soon, and all three companies are set to profit in different ways from the growth of the mobile payments market. 

Key partnerships 

After years of broken promises and missed expectations, many investors have given up on Monitise. However, the mobile money company has a few tricks left up its sleeve.

For example, over the past few years the group has built some extremely valuable partnerships with banks and other key companies, which have given it an edge over peers.  

And as Monitise completes its transition from a one-time license fee business model to a subscription-based model, these partnerships should help the company drive sales growth.

After this year’s management overhaul, Monitise is well placed to capitalise on the mobile payment market growth, and this billionaire is convinced that Monitise is one of the best plays on the mobile payments industry.

Leading company

Paypoint is the UK’s leading consumer payments processor, and the company is one of the better bets on the growth of the mobile-based payments market. 

Paypoint’s earnings per share are set to rise at a steady 6% to 7% over the next three years, which isn’t that impressive. Moreover, the company is trading at a premium valuation of 15 times forward earnings. 

Still, Paypoint has a cash-rich balance sheet with a cash balance of £28m reported at the end of December, after paying an interim dividend of around £8m. This cash figure works out at around 40p per share. And if you strip out cash from Paypoint’s valuation, the company trading at an undemanding forward P/E of 13.9. 

Paypoint current supports a dividend yield of 4.4%, and City analysts expect this yield to hit 5% next year. 

All-in-all, Paypoint is a cash rich company with an impressive dividend yield that’s set for steady growth over the next five years. 

Transformational deal 

Optimal Payments’ recent deal to acquire the Skrill e-wallet — the largest competitor to its own Neteller business — has transformed Optimal’s outlook. The deal has doubled the size of Optimal almost overnight, and it has allowed the company to grab a large chunk of the European online payments market. 

Unfortunately, Optimal’s size, and the company’s prospects, have pushed up its valuation, making it a rather expensive play on the mobile payment market.

Optimal currently trades at a forward P/E of 17.3, which does seem expensive. The company’s earnings are only set to expand 11% this year, although growth is expected to pick up slightly during 2016.

City analysts are expecting Optimal’s earnings to expand by 14% during 2016 putting the company on a 2016 P/E of 15.2. Unlike Paypoint, Optimal does not offer a dividend payout at present. 

Rapid growth 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.