The HPS group will benefit from the boom in the electronic payments industry, with 2022 results expected as a record. The stock currently represents a good entry point for investors, according to research firm Alpha Mena.
HPS stock used to experience strong growth after its IPO. But since 2021, the price has evolved very timidly, despite constantly improving performance.
The latest figures available at the end of September 2022 show that the past year was once again marked by very good results. In a note released on January 24, the research company Alpha Mena reviews the group’s performance and outlook. It anticipates an 18% rise in the price to 7,359 dirhams within six months and changes its recommendation on the stock, from “reduce” to “accumulate”.
A record year 2022 in terms of results
Operating in a growing segment that is set to expand, the group has been constantly improving its results and revenues for several years. At the end of September, it posted a turnover up 27% to 734 million dirhams, including 541 million dirhams of recurring revenue.
“This growth was achieved thanks to the development of the group’s activities and the successful integration of the acquisitions made in 2021. Thus, the successful diversification of the group’s business models resulted in the strengthening of recurring revenues, +42.7 % compared to 9M 2021, now representing 74% of consolidated revenues compared to 66% during the same period in 2021”, notes the research company.
On the profitability side, improvements are also on the agenda. At the end of June last year, the group posted a soaring nearly 84% of its profits to 68 MDH. The research company specifies that the group posted “an operating margin of 18.2% (+220 bps), and a net margin of 14.5% (+450 bps) thanks to the sustained growth in revenues and a management cost effective”. This performance by HPS is notable compared to its peers, which average an operating margin of 12.5% and a net margin of 10.6%.
The figures show the group’s good resilience despite the deterioration of the global economic climate. “For the next few years, we believe that the new acquisitions (IPRC and ICPS) should further boost the growth of the group’s activities, extend its geographical footprint and strengthen its business model”, notes Alpha Mena. For the year 2022, it expects a net result of 146 MDH and revenues of 935 MDH.
Bright prospects in 2023 and an interesting current entry point
This year again, the group should post performances in good shape despite the uncertain economic climate that is looming and the recession expected in various countries. Its managing director, Brahim Berrada, explained to us in a previous post that the group would continue its geographic expansion in 2023 and the consolidation of its market shares in its growth areas.
“The first axis is to continue our geographic development. We now have a strong presence in French-speaking Africa and the Middle East. In these areas, we are in a strategy of consolidating our market shares and supporting our customers,” he said. The group has also recently carried out replacement of its former office in Singapore to support its customers and its regional growth.
The company also intends to continue its diversification, in particular through its Processing activity, included in its payment activity, which is experiencing strong growth. At the end of September, the payment activity saw its turnover increase by 38.2%.
Like the operations carried out in 2021 with the acquisition of the companies IPRC and ICPS, external growth is one of the group’s growth levers. “We have the objective of generating 10% to 15% additional growth per year through external growth. We are considering several targets. They may have consolidation functions, i.e. they are already in our business and allow us to increase our market share and our revenues”, indicated the group’s managing director.
In the end, with good potential for growth in the electronic payments industry, a strong resilience of its business model and a good ability to generate cash, the title currently represents a good entry point for the research company. “The momentum positive is now back. The reassuring achievements of the group as well as its promising long-term prospects should further support the recovery of the title”, concludes Alpha Mena.