Finseta plc (LON:FIN), the UK-based provider of cross-border payment services, is making strides in the fintech space with the launch of the Finseta Corporate Card. This new offering, co-branded with Mastercard, is expected to add a strong recurring revenue stream for the company, benefiting both its SME clients and investors.
A Game-Changer for Finseta’s SME Customers
The Finseta Corporate Card will be available in both virtual and physical formats, offering multi-currency capabilities and global usability across 210 countries. Initially, the company is targeting its existing customer base, providing them with more flexibility and control over business expenses before expanding to new clients.
Shore Capital believes this strategic move will positively impact Finseta’s financials, with revenue generation from the corporate cards starting in the first half of FY25F. More importantly, the high gross margins from this product are set to contribute to operating profit from FY26F.
Valuation and Growth Potential
Finseta’s share price has seen a decline recently, which Shore Capital attributes to an absence of news flow rather than any fundamental weakness. The broker maintains a fair value estimate of 70p per share, suggesting significant upside from the current price of 31p.
Shore Capital’s research highlights Finseta’s operating leverage and expansion strategy, particularly as the company explores new opportunities in the UAE and Canada. The broker states that the company’s P/E ratio for FY25F is around 10x, improving to just 6x in FY26F, with a free cash flow yield rising from 14% to 16% over the same period.
Analyst Viewpoint
Shore Capital’s Vivek Raja remains optimistic about Finseta’s growth prospects, noting that:
“Recent share price weakness has seen FIN fall back, which we think reflects nothing more than the absence of news flow. This has opened considerable upside to our 70p prevailing fair value estimate, which captures FIN’s considerable growth potential and operating leverage.”
With its expansion strategy well underway and a new revenue stream on the horizon, Finseta appears well-positioned to capitalise on the growing demand for cross-border financial solutions.
On a Final Note
Finseta’s launch of the corporate card scheme marks a crucial step in broadening its product offering and strengthening its revenue base. As the company moves forward with international expansion and the commercialisation of new opportunities, investors will be keeping a close eye on its upcoming FY24 results in April. With a strong growth strategy in place and a substantial upside potential, Finseta’s long-term outlook remains compelling.
