US And Abu Dhabi Expansion Will Drive Cross-Border Flows

Key Takeaways

• Expansion into new markets and differentiated product offerings reduce revenue concentration risk and support sustained earnings growth.
  
• Investments in AI and proprietary technology drive operational efficiency, scalability, and margin stability while fostering deeper client relationships.
  
• Margin pressure, revenue volatility from EM exposure, technological disruption, and corridor concentration risk all threaten the sustainability of traditional income streams and earnings stability.

Catalysts

Through its subsidiaries, provides foreign exchange (FX) and cross-border payments services to banks, fintech companies, supranationals, and governments in the United Kingdom and internationally.

• Expansion into new geographic markets-including new offices in the US and planned operations in Abu Dhabi-positions CAB Payments to capture rising cross-border flows between developed markets, the Middle East, and high-growth emerging markets in Africa and LatAm, directly supporting long-term revenue growth.
  
• Strengthened and exclusive central bank relationships, alongside diversification of transaction corridors and product offerings (ACH rails, FX derivatives, guaranteed deposits), expand the company's addressable market and reduce revenue concentration risk, driving earnings growth and predictability.
  
• Ongoing investment in AI and proprietary technology is accelerating operational efficiencies and scalability, enabling the company to process more transactions without increasing costs, thus improving future net margins and operating leverage.
  
• The company's focus on relationship-driven, solution-based services, rather than commoditized transactions, is fostering deeper client integration and annuity-like income streams, supporting sustainable revenue growth and margin stability as global digitalization and financial flows accelerate.
  
• CAB Payments' proactive approach to regulatory compliance, combined with its banking license, positions it to benefit as rising global regulatory standards create higher barriers to entry for competitors, protecting long-term profitability and market share.

CAB Payments Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming CAB Payments Holdings's revenue will grow by 17.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.1% today to 21.2% in 3 years time.
• Analysts expect earnings to reach £30.8 million (and earnings per share of £0.12) by about August 2028, up from £6.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.1x on those 2028 earnings, down from 21.8x today. This future PE is lower than the current PE for the GB Diversified Financial industry at 19.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.91%, as per the Simply Wall St company report.

CAB Payments Holdings Future Earnings Per Share Growth

Risks

• Persistent take rate compression and revenue decline year-on-year (down 8% YoY in H1, attributed to competitive pricing pressure and short-lived market dislocations) signal a challenge to maintaining income growth, threatening both future revenues and net margins.
  
• Heavy exposure to emerging market currencies and flows means ongoing geopolitical instability, US dollar volatility, and regulatory changes (e.g., FX restrictions, sanctions) may cause recurring revenue volatility and impact predictable earnings.
  
• Adoption of blockchain and stablecoin solutions for commodity trading is acknowledged as both a competitive threat and an opportunity, with the risk that faster, cheaper decentralized alternatives could erode CAB Payments' traditional cross-border payment revenues and compress margins.
  
• Ongoing need for substantial investment in product development and technology (notably AI and platform expansion), if not matched by proportional revenue growth, could erode operating leverage and weigh on net earnings.
  
• Continued dependence on central bank relationships and a niche set of complex emerging market corridors exposes the company to concentration risk-sudden regulatory, economic, or competitive shifts in these corridors could lead to disproportionate declines in revenue.

Valuation

• The analysts have a consensus price target of £0.782 for CAB Payments Holdings 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 £1.0, and the most bearish reporting a price target of just £0.45.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £145.4 million, earnings will come to £30.8 million, and it would be trading on a PE ratio of 8.1x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of £0.54, the analyst price target of £0.78 is 31.0% 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.