CSU has just published the 2010 results and I'm reading now.
At a first look, it was not so impacted by Nossa Caixa, since are entering to the portfolio Banrisul, Sicredi, Tribanco... And with costs reductions, it was able to maintain the EBITDA margin.
Also, the company will pay BRL 15.8 millions in dividends, a yield of 6.7%, more stock repurchase program. I estimate a free cash flow similar to the net income of about BRL 30 millions (because the need of investments equals what is deducted in depreciation/amortization). This yields a FCF of about 12.5%.
The main problem still is the contact center. But are good news in this release: new management and plans to increase 50% the P.A. until middle of the year.
So, what is your opinion?
P/E < 8
FCF > 10%
ROE > 20%
Thursday, March 24, 2011
CARD3 - CSU Card System
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14 comments:
Given the recent stock price performance, I'm positively surprised with CSU's earnings in 2010. I expected the insiders were selling like mad.
There some upsides:
1 - positive prospects for the Banrisul contract;
2 - the small impact from the lost of the Nossa Caixa portfolio;
3 - the growth prospects of the credit card market in Brazil;
4 - the promisses to improve CSU Contact (I don't count on this).
In general, the free cash flow is interesting at the current price, with good growth potencial. I won't buy more, but I won't sell either.
Much of the increase in net income was due to the reduction in depreciation.
Yes, but like Fras-le, we have to look to the FREE cash flow, that is about 30 million/year.
At the current price and considering that I don't have too much of it, I'll try to buy more at less than 5 a share.
Now I always look at the cash flow, more specifically the FCL.
What do you think about Itau buying Carrefour Bank? Should probably CSU lost this client too, as occurred with Nossa Caixa?
Probably.
What do you think about CARD at 4.60?
It's very attractive at current FCF, but there is a real risk of competition. I just don't know if it's time to buy more or just wait...
What's the recurrent and consevative FCF?
Contact center will not prosper...
http://exame.abril.com.br/economia/noticias/trabalhador-de-call-center-vai-trabalhar-6h-decide-tst
http://www.bmfbovespa.com.br/Agencia/corpo.asp?origem=exibir&id=18201105260294&manchete=CSU%20CARDSYST%20(CARD-NM)%20-%20COMUNICADO
http://exame.abril.com.br/mercados/noticias/csu-inicia-novo-programa-de-recompra-de-ate-8-8-das-acoes
I tried to stress the FCF of CSU to obtain an upside of "only" 100%, considering the market value of 221M today.
I took away all real growth. Yes, zero growth forever. Then I used a discount rate of 7%.
Those two assumptions implies a present value of 442M, or a FCF of 0,14 x 221 = 31M today.
Then I picked the average FCF (google finance) for 2008, 2009 and 2010 = 31M.
It's 100% upside without growth.
Now the problem: Nossa Caixa. Will CSU be the same again without that client? Is it safe to invest in a company so vulnerable to the loss of a single client? Aren't there other options to invest in cheap FCF?
I think that CARD may be more cheap than CIEL/RDCD/CTAX.
But it's also more risky.
I'll pay to see next quarterly result to take a final decision.
Actually, results were already released.
And they are getting better. This is true even for contact center.
Credit card also improving with Tribanco, Sicredi and Banrisul.
I'll stick to what I have, it's too much a bargain to sell now.
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