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Description:
Ingenico, based in Neuilly-sur-Seine, France, is a leading provider of payment solutions. The company employs more than 4,000 people across 40 countries. Its principal customers are retailers, banks and other service providers. It has more than 20 million terminals under management in about 125 countries. 

Ingenico provides merchants with a complete payment solution (i.e. software and hardware). In the past, the company allocated significant resources to its proprietary hardware business solution, with the aim of securing future market share in the POS market, especially through mobile applications. Ingenico’s current strength lies in the fact that its solutions support the entire transaction processing chain. This is of high market value to its customers and results in deeper and more loyal relationships with its customer base.

Past market expansion has been achieved both organically and through acquisitions. Present development focus is on the integration of mobile operation systems (iOS, Android, etc.) into their ecosystem. The roll-out of these developments would make Ingenico the partner of choice for merchants considering applications with cloud/mobile facilities.

In Latin America, Brazil is the largest market. It is expected that revenue growth this year will be in the region of 15 to 16%, and about 18% for 2014. These figures are supported by the higher use of credit cards across the continent, and the current shift towards Ingenico’s POS terminals.

Strengths and weaknesses analysis / Fundamental analysis: 
Strengths:  

• Ingenico focuses on achieving an EBITA margin of >20%, - A terminal replacement cycle is in the process of being rolled-out across Europe, 
• The problems relating to a recent German customer bankruptcy case have been well identified and corrective steps have been undertaken to prevent similar cases occurring in the future, 
• Latin America business exposure is growing faster than for peer-group companies, 
• The company is a take-over target. 

Weaknesses: 

• Limited upside potential until the introduction of the next product cycle. The present multiples are similar to Visa and MasterCard, who are the top-end companies in this sector, - Ingenico’s operations are not sufficiently protected against fake merchants attempting to enter their ecosystem, 
• The company’s main activity is in Europe, which generates some 42% of revenue. However, this is mostly in the terminals business, which offers little growth and margin expansion potential.  Ingenico could be exposed to a margin squeeze in the European business due to the commoditization of its services if the principal competitor (Verifone) or newcomers (e.g. Square) decide to start marketing to Ingenico’s client base, 
• Roll-out of POS terminals could take longer and disappoint,
• Expected emerging market penetration ratios are too optimistic. The ratios need to be reduced to around 10%.  

Company profile, investment opportunity and asset management integration:

Abbreviations: POS