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

Nice one GF..JB..

MMs playing games with the SP again. Going to add. Spread only 1p.

Cheers GF.

Killik morning notes...................

Neteller



Neteller

Tactical BUY

Price: 552p (+9p)

Price Target: 727p

Risk rating: 8

p/e: 14.9

Net dividend yield: 0%

Market cap: 661m

(p/e and yield are prospective)

Since the end of March the AIM index has fallen by about 10%, with Neteller, which is the fourth largest constituent, down 9% to the current 552p. This mornings 9p rise is caused by a Q1 update which shows that its operations are growing in line with expectations.

Revenue has risen by 121% year-on-year to $34.2m, and profit before tax is up 136% to $18.2m. The company has confirmed that its move to the Isle of Man is now complete for tax purposes, and the resulting fall in the blended tax rate to 10% means that earnings per share have risen an impressive 158% year-on-year.

Neteller is currently trading at 14.9x prospective earnings, on the basis of a jump in eps from 31.5p for December 2005 to 49p in December 2006. The shares trade at a modest discount to Sportingbet (which happens to be the second largest in the AIM index), which is valued at 17x prospective earnings. Sportingbet benefits from a longer stock market track record, and has built up a supportive base of long-term investors in London. It will take time for Neteller to build up the same quality of ownership, and the relative immaturity of its business model will put off some investors. However, we believe the resulting valuation of the shares, which falls to 11.4x our December 2006 estimate of 49p, is too low. 2005 news flow should include the announcement of a deal or deals with joint venture banking partners.

cheers GF.

From CityWire................

Tip Update: Neteller enjoys further strong growth
Published: 11:40 Tuesday 10 May 2005

By: Graeme Davies, Investment Correspondent Neteller says it could be a bid target:
12:25 Tue 05 April 2005 read

Shares in Citywire tip Neteller are back in favour after the online money transfer company issued a strong set of first quarter results which confirm its rapid growth.

In the first quarter of the year Neteller (NLR) doubled its daily receipts to $2.9 million (1.54 million) and grew revenues by 121% to $34.2 million. Pre-tax profits surged by 136% to $18.2 million.

Neteller, which offers fully indemnified money transfers between members' 'e-wallets' and merchants who support its technology, has grown particularly quickly on the back of the explosion in online gaming and in particular poker.

The 665 million company is signing up new members at a rapid rate. At the end of the first quarter it was signing up 2,862 a day, giving it a total of 1.5 million members.

Neteller has stolen a march on rivals such as Paypal by offering its services to the online gaming industry. It differentiates itself from others serving the gaming industry by offering fully indemnified payments due to the strict identity criteria required to qualify for a Neteller e-wallet. It also offers money transfer services and has been registered to operate as a bank in the UK.

The strength of Neteller's business is reflected in the fact that bad debts as a percentage of sales fell from 14% to 13% in the first quarter. As the company grows, economies of scale are also becoming evident with gross margin at 73% in the first quarter.

Neteller is now domiciled in the Isle of Man and has effectively reduced its tax rate from 33% to 10%.

The company has designs on becoming a global internet bank and in March it acquired Macau-based credit card payments processing company Quick Access to give it a foothold in Asia, where it expects to make more acquisitions.

Citywire tipped Neteller in February at 526.5p and watched its share price surge as high as 758p before profit taking hit it hard, taking it back below the 500p level recently. However today's solid first quarter update has pushed it 13p or 2.4% higher to 556p and should instil some confidence in investors.

We remain fans of Neteller and believe its growth story will carry the shares higher as its development progresses. Growth will not always be so spectacular but in the short term it should continue to replicate figures like today's.

I hear theres a very bullish note to go out from Lemming Investor on these tomorrow. Could do very well over the next few days.

cheers GF.

OOps spoke too soon, I did say the next few days though.

cheers GF.

I was sure this would have gone back up in to the 6 after the results,,oh well, will have to wait for the market to sort itself out..

Looks that way Jimmy. Must say though Im far more bullish than I was a few week back.

cheers GF.

Has the note been out from lemming investor yet.

Yes ateeq this morning in fact and was an excelent read. Unfortunately as the site is now a PAY FOR, I cannot copy the BUY note here, but can tell you that it was very bullish and gave an unbiased opinion on competition indicating that there is competition out there in the long term, but nothing NLR should be afraid of.

It also went into the fact that NLR now only pay 10% tax which goes down to nil in a couple of years time, increasing margins.

Its easily the best note I have read on NLRs present postion and it bullish outlook but it also looked at both sides of the coin.

cheers GF.

Evolutions BUY note out late yesterday.................................

10 May 20052

Netellers Q1 trading update pointed to strong improvements in all KPIs with
numbers well ahead of our expectations (see Exhibit 1). Sales increased by 121%
y-o-y to $34.2m whilst PBT was 136% ahead at $18.2m. We are particularly
encouraged by the strength of the revenue margin (revenue as a % of total
receipts) of 13.1%, which is up from 11.8% in Q1 FY04 and 12.9% in Q4 FY04.
Weakness here would signify the first sign of increased competitive pressure,
which we regard as the key short-term risk. Average daily receipts of $2.9m
increased by 100% y-o-y suggesting that the growth of online gaming shows
little sign of abating which is no surprise given Sportingbets strong Q3 trading
update last week.
Exhibit 1: Key Metrics
$m Q1A FY05 Q1E FY05 Variance
Daily sign ups 2,862 2,766 3.5%
Total members ('000) 1,509 1,500 0.6%
Average daily receipts ($'000) 2,866 2,675 7.1%
Average daily receipts per member 1.90 1.78 6.5%
Total receipts ($m) 261 243 7.1%
Revenues 34.2 30.4 12.4%
as a % of total receipts 13.1% 12.5% 61bp
Y/Y growth 121% 96% 2429bp
Gross Profit 24.9 21.3 16.7%
Gross Margin 72.7% 70.0% 271bp
EBITDA 19.1 17.0 12.0%
Margin 55.8% 56.0% -16bp
Y/Y growth 130% 105% 2470bp
PBT 18.2 16.2 11.9%
EPS (c) 13.7 12.2 12.0%
Source: Evolution Securities, Company data
Q1s strong KPIs across the board

Solid KPIs continue
NLRs Q1 numbers were well ahead of our expectations. We have upgraded
our FY05 numbers by c.9% but remain cautious on FY06 given the threat of
increased competition. We retain a Buy recommendation with a 6-mth view.
Mkt Cap 651m Net Cash 41.5m
Neteller (NLR.L)
Q1 Trading Update Price/Target: 543p/625p
160
280
400
520
640
760
M J J A S O N D J F M A
Source: JCF
Buy (remains as)

We have adjusted our full-year numbers to reflect the Q1 results. Whilst our
FY2005 numbers have increased by c.9% we have only marginally increased our
FY2006 numbers (see exhibit 2). We have increased volumes to reflect our belief
that the Poker phenomenon will be more than a passing fad as some fear.
However, we still remain concerned by the threat of increased competition,
which has led to a lowering of our margin expectations. Nigel Payne, CEO of
Sportingbet, mentioned at a recent conference that a number of me-too
operators had entered the market. In addition, rival Fireone has recently started
to offer indemnified funds to merchants which was Netellers USP. We have
little doubt online gaming merchants will welcome the competition and therefore
promote and support these competitors as banking costs represent a significant
proportion of their operating expenses. However we do recognise that, given
the rigorous process involved in opening a Neteller account, any competitors
price would have to be significantly cheaper than NLR to convince consumers to
change provider.

Exhibit 2: P&L forecast upgrade
$m Old FY05E New FY05E Variance Old FY06E New FY06E Variance
Revenues 147.0 160.6 9.3% 208.5 209.1 0.3%
EBITDA 82.3 89.9 9.2% 117.8 118.2 0.3%
PBT 79.1 86.6 9.4% 114.0 114.4 0.4%
EPS (c) 59.4 65.0 9.4% 85.6 85.9 0.4%
Source: Evolution Securities
In light of the above, we have lowered our margin assumptions for FY 2006 (see
exhibit 3).
Exhibit 3: Quarterly assumptions
FY 2004 FY 2005 FY 2006
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Daily sign up growth 53% -10% 43% -1% 38% -10% 10% -10% 10% -10% 10% -10%
Average daily receipt growth 0% -11% 5% 3% 1% 0% -1% -1% -3% -3% -3% -3%
Revenue as % of Sales 11.8% 12.8% 12.4% 12.9% 13.1% 12.4% 12.4% 12.4% 11.8% 11.8% 11.8% 11.8%
Gross margin 69.6% 68.6% 69.6% 69.7% 72.7% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0%
G&A as % of Sales 9.0% 9.5% 9.7% 15.0% 11.9% 14.0% 14.0% 14.0% 13.5% 13.5% 13.5% 13.5%
Source: Evolution Securities, Company data; Shaded area represents EVO forecasts
We believe our numbers are quite conservative (high G&A costs and low revenue
margins). We have completed a sensitivity analysis by looking at what the PE for
FY2006 would be against varying G&A costs and revenue margins (see exhibit 4).
The shaded area represents NLRs target range, whilst the boxed cells are where
our assumptions currently lie.

However, we retain a Buy recommendation as it should be noted that there are
several sources of upgrades to our numbers; 1/ the management are looking to
tie up a JV with a bank which would cross sell products to NLRs +1.5m (and
growing) user base, 2/ geographic diversification (Asia and Europe), 3/ product
diversification (for example, it could enter the P2P money transfer business that is
inhabited by the likes of Western Union (NLR charges 2% vs Western Unions
11%) and 4/ NLR is well placed to make enhancing acquisitions to achieve some
or all of the above.
Our target PEG of 0.25 equates to a target price of 625p and FY06 multiple of
13.8x. ENDS.

cheers GF.

Canaccord Raises NETeller FY 05 Forecasts

Tuesday, May 10, 2005 8:08:50 AM ET
Dow Jones Newswires



1159 GMT [Dow Jones] NETeller (NLR.LN) 1Q revenue of $34.2M was 9.6% above expectations, says house broker Canaccord, driven by high sign-ups. Raises FY 05 revenue forecast to $156.7M and EPS of $0.65, previously $153.7M and $0.64. But maintains quarterly forecasts in anticipation of seasonal factors, as summer tends to be a slower period for Internet gaming. Keeps buy rating and 12-month price target of 875p.

cheers GF.

Interesting read GF ,lets hope we see an increase in the sp , instead of the up and down of the last few weeks..JB..

good research gf
all looks to be still in good shape
we now need the market to respond,
as everything is very fragile at present,
long term nlr is still a winner.

regards HUSTLER

Well its started positive guys, lets hope it continues, by the way Evil K was getiing a little frustrated yesterday with this one acknowledging the very good results update. I suspect one big surge up will see him out.

cheers GF.

Yes but look at it now, going down again,,this one is very frustrating..JB..

Mostly good news all around about NLR. Always had a good feel about this one and have held on to what I have since Nov 04 and added on twice since on lows. As i have said in the past all the gurus and pandits cannot be wrong. I am pretty sure just like SEO if EK got out of this - many more will go for it, and we would see a good rise .Am right in thinking that someone is close to Ek on this chat boards - can he not put in a word so that EK sees sense !!!!
P/271

GGGrrrrrr. Bought back in today on the back of all the positive news - and it immediately dropped. Sorry guys - it must be my fault as every time I come back in it seems to drop.

Baza

I know what you mean bhunt,,every time i think its on the move again it goes back down,,i have however bought more today as it has to come good soon..JB

What the f*** is going on with this one....it just defies logic every time!
I wana average down but dont know if the current price will regain its downward momentum that it had before the build up to the interims.........whats the feeling do you think its gonna slide for a while?