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Total System Strengthens in Zimbabwe

by Zacks Equity Research

December 11, 2012 | Comments : 0 Recommended this article: (0)

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Boosting its merchant acquiring services, Total System Services Inc. (TSS - Analyst Report) announced a strategic alliance with Zimbabwe-based NMB Bank Ltd. Through this alliance, Total System plans to use its PRIME 4 card management solution – a multi-resource single technology platform that offers card solutions to acquirers and issuers.

Accordingly, NMB Bank has agreed to shift its credit card portfolio from Visa Inc. (V - Analyst Report) to Total System’s PRIME 4, in order to enable its cards to operate on improved security and management. PRIME 4 solutions are designed in compliance with Service Orientated Architecture and benefit the users with a web-based and scalable solution. NMB Bank is now added to the list of more than 130 clients who use the company’s PRIME 4 technology in over 70 countries.

Moreover, Total System’s penetration into Zimbabwe also fortifies its position in Africa, where the top banks of South Africa, Nigeria and Kenya already stand to benefit from the merchant acquiring services of the company. Over the last couple of years, Total Systemhas been making technological advancements through the PRIME 4 card management solutions, VAR Partner Connect Program and Mobile App. These technical solutions have driven the accounts on file of the company and helped it earn significant contracts and alliances to drive long-term growth.

Total System has been witnessing improvement in its financials over the past few quarters based on its steady fundamental growth initiatives. Its risk-free balance sheet, modest cash position and cash flow generating capability provide viable scope for efficient capital deployment. However, risks related to operating leverage and competitive pressure fromarch-rivals such as Heartland Payment Systems Inc. (HPY - Snapshot Report) and WEX Inc. (WXS) remain eminent.

Based on the pros and cons, the Zacks Consensus Estimate currently pegs earnings at 33 cents for the fourth quarter of 2012, up about 6% over the prior-year quarter. For 2012, earnings are projected to increase to $1.29 per share. This reflects an increase of about 12.5% year over year, which is slightly higher than the upper end of management’s guidance of 10–12% growth for 2012. Based on its influential contracts, management also expects to achieve the higher-end of its guidance in all growth metrics

Currently, we maintain a long-term Neutral stance on Total System with a Zacks Rank #3, which implies a short-term Hold rating.

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