Independence And Partnerships With Santander And Cobee Will Improve Operational Efficiency

Key Takeaways

• Enhanced operational efficiency and recent M&A activities, including strategic partnerships and acquisitions, are expected to bolster business volumes and revenue growth.
  
• Expansion into underpenetrated markets through diversified digital payment platforms could drive volume growth and improve profitability.
  
• Regulatory changes, spin-off costs, and currency fluctuations pose significant risks to Pluxee's revenue, margins, and financial stability.

Catalysts

Offers employee benefits and engagement solutions services in France, Latin America, Continental Europe, and internationally.

• The successful transformation to an independent company and enhancement in operational efficiency is anticipated to provide significant operational leverage, positively impacting recurring EBITDA margins.
  
• Recent M&A activities, such as the strategic partnership with Santander in Brazil and acquisition of Cobee in Spain, are expected to augment business volumes and cross-selling, leading to future revenue growth.
  
• An expanded and diversified digital payment platform that offers integrated multi-benefit solutions, especially in underpenetrated markets like SMEs, could drive business volume and potentially improve net margins.
  
• Strong commercial dynamics, particularly in Latin America and the Rest of the World, are expected to sustain and enhance organic revenue growth, impacting total revenues positively.
  
• The policy shift to base dividend payouts on adjusted net profit demonstrates an alignment with operational performance, potentially enhancing earnings per share and shareholder returns.

Pluxee Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Pluxee's revenue will grow by 9.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.0% today to 18.3% in 3 years time.
• Analysts expect earnings to reach €287.2 million (and earnings per share of €2.03) by about February 2028, up from €133.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as €331.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.8x on those 2028 earnings, down from 24.8x today. This future PE is lower than the current PE for the FR Diversified Financial industry at 24.8x.
• Analysts expect the number of shares outstanding to decline by 0.81% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.54%, as per the Simply Wall St company report.

Pluxee Future Earnings Per Share Growth

Risks

• Potential regulatory changes, such as the introduction of a 5% cap on merchant commissions in Italy, and any similar regulatory risks in other regions could negatively impact Pluxee's revenue streams and margins.
  
• The discontinuation and uncertainty surrounding public benefit contracts, like the one in Chile, highlight risks in Pluxee's revenue continuity and may lead to unpredictable revenue fluctuations.
  
• Pluxee's transition to a standalone company incurred significant costs (€62 million in one-off expenses for the spin-off and rebranding), which suggests future margin pressures as the company continues to structure itself independently from Sodexo.
  
• Currency translation effects, which had a negative impact of €190 million on the cash position, suggest that foreign exchange fluctuations pose potential risks to the financial performance and net margins of the company.
  
• The net borrowing cost increase, a result of the new capital structure following the spin-off, signifies a potential risk for Pluxee's net margins if interest rates were to rise or if there is volatility in the fiscal environment.

Valuation

• The analysts have a consensus price target of €25.75 for Pluxee based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €40.0, and the most bearish reporting a price target of just €18.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.6 billion, earnings will come to €287.2 million, and it would be trading on a PE ratio of 15.8x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of €22.62, the analyst price target of €25.75 is 12.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.