Accelerating Digitalization In Emerging Markets Will Unlock Growth

Key Takeaways

• Expanding in high-growth markets and enhancing platform capabilities could drive significant revenue acceleration as digital adoption and competition from traditional banks decline.
  
• Proprietary technology, automation, and capital-light trade finance are poised to deliver strong margin expansion and resilient, high-quality earnings growth.
  
• Heavy reliance on volatile emerging markets, shrinking margins, rising costs, regulatory pressures, and limited diversification all threaten revenue stability and constrain long-term growth prospects.

Catalysts

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

• Analysts broadly agree that geographic and client diversification will stabilize revenues, but this may be understated-by broadening its platform and winning new income-generating clients in high-GDP growth markets, CAB Payments could unlock step-changes in revenue as emerging market digitization accelerates and as competitive intensity from traditional banks wanes even further.
  
• Analyst consensus expects cost efficiencies and tech investments to modestly increase margins, but the substantial automation, business integration, and proprietary platform enhancements could enable disproportionately higher operating leverage as revenue rebounds, driving margin expansion far above consensus.
  
• As cross-border B2B payments undergo rapid digital transformation and legacy banks exit difficult jurisdictions, CAB Payments' early-mover status and tech-driven solutions position it to capture a vastly increased share of fast-growing remittance and trade flows, unlocking multi-year revenue compounding.
  
• Unique capital-light trade finance origination, where CAB Payments leverages third-party balance sheets and deep local relationships, is set to generate high-margin, recurring fee streams without balance sheet risk, materially improving both earnings quality and the resilience of future growth.
  
• New value-added services-such as streamlined real-time pay-ins/payouts, accountless payment models, and expanding mobile wallet capabilities for difficult-to-access regions-address large unmet needs in financial inclusion and global commerce, creating outsized potential for both transaction-driven revenue and differentiated pricing power.

CAB Payments Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on CAB Payments Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming CAB Payments Holdings's revenue will grow by 20.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 15.6% today to 21.6% in 3 years time.
• The bullish analysts expect earnings to reach £34.3 million (and earnings per share of £0.13) by about July 2028, up from £14.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 9.2x on those 2028 earnings, up from 8.7x today. This future PE is lower than the current PE for the GB Diversified Financial industry at 16.7x.
• 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 7.79%, as per the Simply Wall St company report.

CAB Payments Holdings Future Earnings Per Share Growth

Risks

• CAB Payments Holdings remains highly exposed to geopolitical and macroeconomic risks in emerging and frontier markets, as evidenced by material revenue declines tied to specific currencies like the Nigerian naira and Central/West African francs, which could undermine future revenue stability and earnings if similar disruptions reoccur.
  
• The accelerating decline in emerging market take rates, from 55 basis points to 29 basis points year-on-year (even excluding outliers), highlights margin compression caused by competitive intensity and supply-demand shifts, which may result in persistent pressure on net margins going forward.
  
• CAB Payments is investing heavily in technology and infrastructure, with fixed operating costs now at 70 percent of the total, and overall costs rising 6 percent in 2024, so if revenue grows slower than anticipated due to competitive, regulatory, or market headwinds, earnings and cash flow could be negatively impacted by negative operating leverage.
  
• Global regulatory scrutiny is increasing, with CAB openly emphasizing the need to be visible to central banks and compliant with regulations, but also stating that competitors operating outside these rules are able to undercut on pricing, presenting both ongoing compliance cost risks and potential revenue loss from losing price-sensitive clients to less regulated providers.
  
• The company's limited product diversification relative to global payment peers and current reliance on a relatively concentrated client base means that customer attrition or failure to rapidly win business in new corridors and product lines could disproportionately impact core revenues and limit long-term growth.

Valuation

• The assumed bullish price target for CAB Payments Holdings is £1.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of CAB Payments Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 £0.5.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be £158.8 million, earnings will come to £34.3 million, and it would be trading on a PE ratio of 9.2x, assuming you use a discount rate of 7.8%.
• Given the current share price of £0.48, the bullish analyst price target of £1.0 is 51.5% 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.