SCH and its cash pile

20th Jul '16 by Whitbyview

12 comments 6297 reads

I notice that this company has quite a lot of cash (and no debt) on its books and that, according to the recent trading update, less than 5% of that cash is held in GBPs. From an accounting point of view, with the recent devaluation of the Pound, should we expect to see the cash reserves rise the next time these are reportedly as a result, assuming they don't spend the money in the meantime of course? The shares have recovered somewhat from the recent low (where the company did a share buyback interestingly) but I'm wondering whether to top up on the small holding I have as this seems to be one of the few companies that I know that trades predominantly in dollars and hasn't seen a significant rise as a result. Any thoughts on why SafeCharge International (LON:SCH) seems to have missed the post BREXIT party? Thanks.

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Whitbyview

23rd Jul '16

Well based on the stunned silence on this one, I am assuming few people here have much knowledge of this company. I decided to back my instinct and top up anyway. Since I did so the share price has drifted up each day ... Usually things plummet when I buy so a nice change :)

Carey Blunt

24th Jul '16

Hi, you guessed right, no knowledge on this one but i may look into it more! I like companies with cash although payment industry companies make me nervous in general for some reason. I think it's because there seem to be a lot of them these days and I'm never sure how to differentiate between them or understand their USP.
Thanks for pointing it out though, will take a look.

Notice they banked the shares they bought in treasury rather than cancelling them, also it seems there was a big sell from an institution which may have put buyers off and suppressed the sp?

Yes, I think financials (or perhaps in this case, fintech) are always a bit more of a gamble compared to companies that make widgets (that are easier to understand) but I was trying to balance my portfolio when I came across this one. In terms of market cap it is far from being a minnow but it is dwarfed by others like Worldpay (LON:WPG) and Sage (LON:SGE). That could be a bad thing or it could mean it's a take-over target if it is doing as well as he press releases seem to suggest. That cash pile (not held in GBP) has to be putting it on someone's radar I would have thought. My reading suggests that there is a bit of a 'moat' here in terms of their software and it certainly seems to be winning contracts on the basis of this. That said, I don't honestly know enough about this company (which is why I was looking for a bit of external insight) but a lot of what I have read has been very upbeat. One of the nice things about Stockopedia is being able to design screens that fit the profile of companies you might never have previously considered. For me, this is a real case in point. I have a couple of different screens that I use and this company kept appearing so I have decided to take the plunge. We'll see if that's a good move or just plain daft.

timarr

SafeCharge International (LON:SCH) is controlled by NorthenStar Investments, who hold 66% of the company. NorthenStar is a Teddy Sagi vehicle, so a decision to invest is largely a decision about him. He's also the man behind Playtech (LON:PTEC).

It's hard to see where Safecharge's business moat is, the payments business is a pretty low margin affair but they seem to be making a decent turn, presumably because they're offering a range of value added services which help to lock in customers. For a nimble company it's an interesting area, lots of disruptive innovation, but you have to pretty smart to stay ahead.

I'm not sure about the dollar impact either, the sensitivity analysis in the last annual report suggests that devaluation of sterling against the dollar won't make much of an impact to their figures. But I haven't really looked closely, I try not to invest in companies with a single, dominant shareholder, regardless of the other economics.

timarr

Thanks, Timarr ... that's exactly the sort of input I was looking for when I put in the post ... much appreciated. I'll do some more reading.

4th Aug '16

I've never thought of myself as a momentum investor before but the various stock ranks for this one are certainly starting to point that way, in contrast to the rest of my portfolio. Given the wind that appears to be in the sails right now, I will try to hold my nerve and not sell out too early as is often stated as being one of our weak points as investors. That said, having topped up below £2 just a few weeks ago when I started this thread, if the price keeps rising like this I might take some profits on the top up shares at least. Interesting to see what momentum can really do for a share like this apparently on the way up ... The trick is avoiding the opposite on the way down I suspect! I will hold my nerve ... Maybe :)

Brilliant Leader

13th Sep '16

SafeCharge International (LON:SCH) published their interims this morning

http://uk.advfn.com/stock-market/london/safecharge-intl-SCH/share-news/SafeCharge-International-Group-Limited-Announces-I/72415264

plus new customer wins
http://uk.advfn.com/stock-market/london/safecharge-intl-SCH/share-news/Sun-Bingo-and-Fabulous-Bingo-select-SafeCharges-Pa/72415562

Considering all the key metrics are up, including a 75% rise in the interim divi and close to £100m in cash on the books, I was surprised to see the share price down over 5% today.

I hold and will probably add as more funds become available.

AnonymousUser252054

23% EPS rise was impressive but set against the meagre 5% revenue increase and an indication that growth will slow in H2 concerned me so I sold (so be reassured it will probably zoom up from tomorrow). The more generous dividend policy is very attractive and I would have held if the share price had been around 220p. A litle too pricey at the mo in my opinion as that div looks expensive if the price slides.

14th Sep '16

Thanks for sharing your thoughts shine66. If I was looking at this as a dividend play, then I can see your point about the valuation becoming overheated. However, I see SCH as a growth play with a dividend that helps me to stay patient and a cash pile that helps me to sleep at night. I believe the launch of their own platform is significant and will lead to improved margins and revenues going forward.

Good to have an insight on why people might have been selling yesterday though, thanks again.

oscar247

SafeCharge - everything Monitise could and should have been!

The FinTech industry has attracted huge sums of growth equity and venture capital. Investment this year of $20 billion following last years $14 billion. More than 16000 players worldwide. The UK FinTech sector generated £6.6bn in 2015 and a workforce of over 60,000.

In this competitive sector , SCH’s growth and profitability has been impressive. The promise of continued growth, beyond 2017 and winning impressive new clients, imply SafeCharge nimble, smart and their platforms offering distinct advantages over competitors.

SCH’s investment last year in 5% of FinTech AG ( one of Europe’s leading provider of innovative technologies in the financial sector.) indicate they are looking for strategic partnerships and/or acquisitions.

SCH has delivered. With future growth and earnings visibility high happy to hold and add on dips.

Lozmo0902

16th Mar '17

Anyone have any ideas why SCH is dropping like a stone? I cannot see any hint why!

SCH and its cash pile

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Whitbyview

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