London, UK, 17 April 2019

Edison issues outlook on Piteco (PITE)

Piteco's traditional corporate treasury business returned to growth in FY18 after a flat FY17, with growth accelerating in H2 and momentum continuing in FY19. Juniper Payments, the group's US payments software business, recorded solid FY18 results while Myrios, acquired late in the 2018, recorded an impressive initial contribution. Consequently, the shares look increasingly attractive on c 11x our FY20e earnings.

The stock looks appealing, trading on c 12x our EPS in FY19e, falling to c 11x in FY20e and to c 10x in FY21e. Our DCF model suggests a valuation of 655c (previously 591c), which is 22% above the current price. Our calculation uses assumptions including a 5.8% CAGR in organic net sales revenue over 10 years, long-term operating margins of 40% of net sales and a WACC of 9%. We have also adjusted for the dilution impact of the convertible bonds.

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