Earthport Plc (EPO), a processor of cross-border payments and e-commerce transactions, may be poised for a gain after the shares fell 19 percent since it agreed to serve American Express Co. (AXP:US), according to two analysts who track the company.
“The true scale and potential of this business is far from realized,” Mike Allen, an analyst at Panmure Gordon & Co., said March 28 after Earthport reported that revenue gained 32 percent in the six months through December. He reiterated a buy recommendation and predicts the shares will rise to 32 pence, a potential gain of 68 percent. Peter McNally at Charles Stanley Securities also rates the shares a buy.
The shares gained 1.3 percent to 19.25 pence as of 3:10 p.m. today in London after falling 5 percent over the previous two days.
Foreign exchange payments and e-commerce are increasing as companies and individuals do more business on the Internet. Even so, Earthport has declined steadily since it won the AmEx contract in early March and reported that transaction volume rose 72 percent in the second half. The London-based company is expanding its 55-country banking network and counts clients from Bank of America Corp. (BAC:US) to BB&T Corp. (BBT:US)
“The company is seeing heightened interest in all forms of cross-border activity,” Panmure’s Allen said. Changes to banking regulations are helping Earthport win contracts to handle transactions, he said.
Allen, whose ratings of 11 of the 27 companies he covers have produced the best returns among analysts who share their research with Bloomberg, named Earthport a top pick at the start of the year. The stock has gained about 12 percent since then.
“They are a development company and we don’t know how soon they will be going to take off,” McNally at Charles Stanley said in a phone interview. “They are a very good investment, if high risk, high reward.”
Earthport has been unprofitable for at least 10 years, though earnings improved in the last two six-month periods compared with a year earlier, according to data compiled by Bloomberg. Revenue rose 21 percent in the fiscal year ended in June 2012, and growth quickened to 32 percent in the first half of the current fiscal year.
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