Network International Holdings PLC

Dubai, United Arab Emirates-based Network International Holdings PLC (LON: NETW) is a provider of a full suite of technology-enabled payments solutions with operation centres in the UAE, Egypt, Jordan, South Africa and Nigeria. To more than 65,000 merchant partners and 220 financial institutions, the company provides a robust suite of payment products and services, which includes a number of proprietary elements, including our own online payments gateway. The group is a leading payment solutions provider in the Middle East and Africa (MEA) region and the largest acquirer in the UAE, with platforms designed for customers of varying levels of size and complexity and across multiple channels. The operations of the Network International Holdings are differentiated in two geographical division, namely the Middle East and Africa.

On 9^th March 2020, the company will announce its 2019 preliminary audited results.

Recent News
On 22^nd January 2020, the company released the appointments of Anil Dua and Ali Mazanderani to its Board of Directors. Both will join as Independent Non-Executive Directors.

Q3 Business Update (as on 30^th October 2019)
In the third quarter of the financial year 2019, the group reported that it continued to make progress across its strategic priorities and reported strong revenue growth in both the business lines and geographic segments, backed by good growth across all of the key performance indicators. The company also released the technology migration to its new platform, called Network One, which seamlessly integrates all payment methods. The company also highlighted a strategic partnership with Mastercard. The group aims to maintain stable underlying EBITDA margins for 2019 and reported that it remained on track to deliver low double-digit constant currency organic revenue growth and aimed to capture significant opportunities that exist across its markets.

Share Price Performance

Daily Chart as at February-10-20, before the market closed (Source: Thomson Reuters)

Network International Holdings PLC shares were trading at GBX 624 the time of writing before the market close (at 3:30 PM GMT) on 10^th February 2020 and were down by 1.887% versus the previous day closing price. Stock 52 weeks High and Low are GBX 650.00/GBX 435.00. On a year to date basis, the stock price has given negative approximately 2.81 per cent returns.

Conclusion
The company competes with certain firms that are larger and have greater financial resources, and though the group has reported strong growth across its operational indicators, the digital payments industry is highly competitive, which can hinder future growth. The use of its services could decline, reducing its revenue and profitability, if the company cannot provide new services to its clients and keep pace with rapid developments and change in its industry, along with the threat that it may experience software defects, undetected errors and development delays.

While the company remains confident that it will perform in-line with the guidance, the current market volatility and geopolitical environment can severely affect business operations and might have a negative impact on the stock performance.

The company’s operations are impacted by risks related to market trends, political change and change in the regulatory authority.The company’s EV/Sales, EV/EBITDA, Price/Earnings, and Price/Cash Flow multiples are higher as compared to the industry multiple, reflecting overstretched valuations. Moreover, the company is trading near a 52-week high, raising doubts at its upside potential at the current prices.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 636 (as on 7^th February 2020), while we look for any upcoming catalysts in the near term.

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