Making Money on Taxpayers
|Written by GSCR Staff|
|Thursday, 13 December 2012 10:53|
We have an interesting play on government spending and taxes, which as we can all agree, are not going away anytime soon. Why not capitalize on it, right?
Official Payments Holdings, Inc. (NASDAQ – OPAY - $5.47) has a solid business model, is largely past its turnaround phase and should record a 50% increase in Adjusted EBITDA from continuing operations next year. Moreover, the stock reached a 52-week high today ($6.00) before retreating slightly, and the charts, are well, off the charts. Clearly, big things loom ahead.
What do they do? OPAY provides billing agencies such as federal, state, and local governments, educational institutions, utility companies, and other public sector clients, a direct electronic payment system for taxpayers, students, customers, etc. They offer flexible payment options as well as flexible payment types ranging from credit cards to money orders, allowing maximum ease of use for all involved. The Company has clients in all 50 states and Puerto Rico.
The Company announced its FY13 financial results earlier today and the news was strong great given the fact that Q4 is usually the slowest revenue period for OPAY due to seasonality related to the timing of receipt of annual payments.
A few highlights: Q4 net revenue jumped by 38.5% from 4Q11. The Company was $1.4 million in the red in adjusted EBITDA from operations in 4Q11 but $0.2 million in the black for the same metric in 4Q12.
On the conference call, the Company’s CEO attributed the operational efficiency gains to initiatives implemented in 2010 coming to fruition. OPAY also implemented a new three payment platform upgrade this year to be completed in 2013, and it appears as if the cost to the company will only be $3 million, versus the original $10-$12 million forecasted earlier.
With an expected 50% increase in Adjusted EBITDA from continuing ops next year, we could see the stock approaching the $8.00 level in the coming months, which is a point it last achieved in early 2010.
We think OPAY is poised to make a run, and like the $6 - $6.50 range is possible.
Disclosure: I am neither long nor short these shares but I may elect to purchase the stock within the next 48 hours.
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