NETeller - NLR - 3.15
Thought i would start a new thread following on from
hawick - new issue looks very special - not to steal the thunder from
hawick but just to highlight the company name to those not already in to this
potential blockbuster.
Those of us who are following NETeller know the background and have been
active with postings,for newcomers i strongly sugest viewing the
( new issue looks very special posting )the content will speak for itself.

Brief overview of NETeller
The company handles online cash transactions across the globe
on 21st oct gained fsa approval to operate as a regulated e-money issuer
and will passport the regulated status to all 25 EU member states
it has over 1 million clients rising by 2000 number each day
1500 online merchants and processed over $1.5 billion in 2003
pre tax profit is estimated to be 29 million to dec 04 rising to
40 million next year
per currently 20 to dec 04 falling to 11.5 which is low for sector
brokers have been raising forcasts on a regular basis
share price has risen over 50% since launch earlier this year
new markets emerging constantly,asia has the potential for supergrowth
online casinos are creating enormous profits
given all this - cash generative - huge market - fsa approval
infastructure in place to handle growth, profits accrue to bottom line
the market force is behind it with good relative strength
all put together it is hard to argue against this has the potential
to be a blockbuster over the year ahead

regards HUSTLER

On the way up again ,small increase ,but going the right way,

Posted by M.T. Glass across the road :

"..NETeller may even have the potential to join such star companies as Ebay, Google, Yahoo and Amazon as one of the key heavyweights of Internet commerce..."

From this week's TSW, posted by Doomsday at http://www.advfn.com/cmn/fbb/thread.php3?id=6763322&from=2920

Afternoon all,

Posted summary on the other BB I use for NLR info (very popular at the moment) which I thought was worth viewing:

"
Here are half a dozen, in no particular order....

Durlacher targeted short term 700p, and potential for 1200p - I didnt see their analysis, so dont know rationale....

F/c eps for y/e 12/04, 05, 06 are

15.97p
27.86 (+74.5%)
54.06 (+94%) acc to sharescope

So, in 6 months time, we will be looking 18 mnths forward to eps of 54p, ie p/e 11.5 at todays price

There was a pre-close trading update 4 Feb..new signups in Q4 were up 94% y-o-y

Quantum Leap tipped it recently, Inv Chronicle, too, and someone else, as I recall.

Gambling is a growth business, online gambling also, and gamblers want instant cash to spend.....NLR charges the gambler 8% (yes , 8%) to give him instant access to cash......
without the cash/NLR guarantee, they cant get betting...

Gambling companies are keen to sign up NLR, as they want to outsorce the lending risk - no bad debts, since NLR is looking after that!

Looks like a no-brainer to me.....except that what I can't work out is what barriers to entry there are, to stop another few dozen NLRs springing up to compete.....does anyone else know???
"

And another which was a response to the final point regarding competition -

"
There aren't any barriers as such. But customer loyalty is incredibly important in the gaming sector and one of its main constituent parts is that the punter feels that his money is safe. It would take something pretty radical to get a big gaming firm to switch their banking I'd suggest, so these boys look fairly safe. Just my opinion of course.
"

Fairly interesting points made regarding customer loyalty in hte face of competition that I hadn't really considered. Think the writer has a point and can only good in the longer term.

Still a chance of 600p by the end of the day which would make a pleasant end to the week ...

Cheers,
Stuart

I had it down for 600 by the end of the week,,its struggling to get there at the moment ..JB

600 Here we come ,Jb..

I think you might just scrape home with your 600 share

Another quiet week almost over.








:-)

Still finished on a high though Dil..Jb

Great end of the week for me holding MMG and NLR...and more to come I expect.

Amazing how NLR perks up virtually at the end of every trading day. Anyone got any theories why that is?

Dils valuations????????????????????.

cheers GF.

The Durlacer note we have been given details of......................

For informational purposes only. If you 'aint in .... GET IN.!!!!



Durlacher:
NETeller + Sportingbet 447p
To Poker or not to poker

536.1m Speciality Finance NLR

The decision by Party Poker, the worlds largest on-line poker operator, to seek a UK listing underlines the continued heady growth in the sector. SuperBowl plus a glorious NFL season that saw many of the favourites win, will ensure that Q1 2005 has been a strong quarter.

We recently upgraded our short term price target for NETeller to 500p.

However, positive industry news supports a more aggressive target.

The current rating of just 16.0 PER to December 2005 is in our view, too low for a business that is effectively a low risk, non-site specific geographically diverse way of playing on-line gambling. By the end of the year we would expect the rating to exceed 25PER or a price target of 700p. Even at 700p NETeller would enter the 2006 year on a prospective PER of just 12.7.

Our short term price target is thus raised to 700p and longer term to 1200p.

No doubt UK investors will continue to doubt the rates of growth but they should note simple credit card processing companies in the USA command prospective ratings around 35 times NETeller is cheap by comparison.

Our estimates do not reflect any additional income NETeller can drive from its recent award of a UK e- Money license (such as direct advertising, loans, mortgages or credit cards) from its existing customer base or the significant upside from the long anticipated entry into Asia. We have not reduced our forecast 10% tax charge despite the Isle of Man, their domicile location, announcing taxation falling from 10% to 0%.

Finally, we met Sportingbet yesterday. We were impressed by their market position and clear continued growth. Numbers in the market appear to be too low. Q1 profits of 5m were followed by 15m which will only be complemented by their Q3 which is normally their strongest period. We believe Sportingbets PBT will be around 52m for the year, well above the house forecast. Next year
looks set to show significant growth with forecasts around 80m to 85m looking possible. BUY

cheers GF.

I think you ought to post that Durlacher note once a week Goldfinger just to remind us whats left in this share.

The fact that this has the habit of finishing on an intra day all time high is proof enough to me that the bull run is not yet over.

capa

Yup give us a reminder next monday ..........LOL.

cheers GF.

It's just starting capa.

Ill second that Dil.

cheers GF.

Lifted from advfn and tipped yesterday friday in the share weekly..........

Friday, February 11, 2005


NETeller is up by 46% since 21 January

Since I recommended shares in electronic wallet business, NETeller, at 397.5p in the 21 January issue of TSW the shares have rocketed to 581.5p. Such a sharp rise in a short period of time, coming on top of an earlier strong rise from the April 2004 flotation price of 200p, leaves the shares vulnerable to a reaction on profit-taking. But, even at the higher price, the shares look exciting for long term investors given the rate at which the business is growing and the opportunity to build a large business.

Subsequent to my recommendation of the shares I have been talking to the company to gain a better insight into the business model and the service provided by the company to its customers. In part what is happening is that the company is meeting a need not satisfactorily met by credit cards. In addition, it is able to grow profitably at a spectacular rate because it has the support of the online gaming businesses and enjoys virtually zero customer-acquisition costs. By contrast, the average cost to banks of acquiring a customer in the UK is around 200.


Here's how they do it
NETeller works as follows. Customers for online gaming sites are offered various payment options typically including NETeller. If they choose the NETeller option they have to go through a signing up process which can take around 18 minutes. The company is trying to reduce this time but cannot compromise on its capacity to know its customers and its ability to verify each transaction.

Once the forms are completed the customer needs to put money in his electronic wallet. There are various options, credit cards, BACS transfer and the like, but they all take 2-4 days to put money in the account. The alternative is to opt for Instacash. The e-wallet is loaded immediately with 500 in cash for an eight per cent charge. NETeller has the customers bank details and debits his account with the money. In practice, in 10 per cent of cases, there is insufficient money in the account. The company then terminates these customers effectively using the process as a filtering mechanism to secure the 90 per cent of new customers who do settle their debts. A high proportion of these customers continues to use the Instacash facility generating profits for NETeller.


NETeller makes money in three ways
The company has three ways to make money. There are the charges for Instacash, which generate around 40 per cent of profits. The company also makes a three per cent transaction charge, in line with credit card fees, when it transfers money to merchants. This accounts for around half of profits. A third source of profits is merchants who pay the Instacash charge for their customers in order to win their business. The merchants drive a harder bargain and pay 5.3 per cent for Instacash rather than eight per cent. In total the company makes around 11 cents of profit for each $1 in the system and is hugely profitable with pre tax and interest margins over 60 per cent.

Online gaming companies like NETeller because it pays them with indemnified money. A further advantage is that, unlike with credit cards, winnings can be paid by the merchants into the customers e-wallet where they can again be used for gaming. This creates a multiplier effect on money entering into the NETeller system. The company reckons the multiplier is 1.8 times in North America where the company presently does most of its business. In the UK and Europe the multiplier is higher.

The company has ambitions beyond the gaming market. For example e-wallets are ideal for cross-border peer transactions where both parties have ewallets. The recipient of the cash can then use a NETeller debit card to take out cash from a cash point machine or transfer funds from the e-wallet into a bank account.

Another exciting prospect relates to stock market transactions. These have much in common with betting (too much, some investors might think) and could lend themselves to the e-wallet approach. Trials are being conducted with some small Canadian stock brokers. Ultimately the company has aspirations to become an Internet bank.


International opportunity
An exciting area of potential for the company is international expansion. The barely tapped UK and European markets are around a third the size of the USA and growing fast from a small base. The Holy Grail of growth is Asia where there is a high propensity to gamble and a market 3-5 times the size of the US. Even the Japanese market alone equals the US. The company says there are difficulties with the banking infrastructure and investors should not expect too rapid progress.

Nevertheless NETeller has all the makings of a phenomenal growth story with the customer base growing at over 2000 a day in the fourth quarter even though traditionally the fastest growth comes in the first and third quarters. Already there are over 1.25m customers, or members, for a company that was only launched six years ago. In the last year close to $3bn in funds was transferred and the growth rate is arguably even accelerating.

When co-founder, Steve Lawrence, realised the potential of the business, two and a half years ago, he recruited a heavyweight chief executive, Gord Herman, formerly boss of GE Capital in Canada. Since then growth has been rocket-paced. NETeller may even have the potential to join such star companies as Ebay, Google, Yahoo and Amazon as one of the key heavyweights of Internet commerce.

cheers GF.

This is such an exciting share !! I can hardly believe my luck in finding and actually following my instincts by buying. It could so easily have been a wish I'd bought story. thanks for the info GF. With all your picks doing so well when do you make your first million??

Some more coverage here as well MP.............



mitzy - 12 Feb'05 - 14:30 - 260 of 261


Recieved my Feb edition of Scsw today and they mention they have visited the management of three Biotech companies this month and they will reveal more next month.I'm hoping its MMI's...because they covered them 3 years ago and then dropped coverage of them.
Neteller is the January tip of the month in their portfolio..

cheers GF

From the Fleet Street Letter.......................

...."As evidence of the beauty of its business model just consider these facts: every $1 deposited with NETeller typically brings in $0.11 of revenue and this translates into $0.066 of profit. So for the first quarter of 2004 the company made an impressive daily profit of $92,500.

Its revenue is derived from it taking a cut from each movement of cash that takes place between the merchant and the customer and at present 63% of NETeller's earnings come from its merchant base.

Spectacular margins - and take a look at that growing cash mountain

It enjoys a spectacular gross margin of 69% and with limited additional costs expected during its predicted future growth, much of its new business will be dropping straight through to the bottom line. Profits are expected to hit $51m this year and grow to $67m for 2005.

One thing the company does not suffer from is an ability to generate cash. At the end of June NETeller was sitting on a cash pile of $122m compared with $31m the previous year.

Its rapid growth and cash generation is a result of it successfully growing both its base of customers - they presently stand at 1m and are predicted to double over the next 12 months - and its merchants that now number 1,500. "

cheers GF.