Ever since Monitise (LSE: MONI) warned alongside itsfull-year 2015 annual results that it was going to miss forecasts once again next year, and the companys experienced CEO, Elizabeth Buse, was leaving after only a few months on the job, theres been little in the way of news flow from the company.
The most important piece of news came at the end of October. Monitise announced that it had agreed a deal with Spanish telecommunications company Telefnica SAs Telefnica Digital to explore potential projects. However, the company noted that this agreement would not affect itsguidance for the current financial year.
The company still believes that by cutting costs, it can reachEBITDA (earnings excluding exceptional items, depreciation, amortisation, impairments and share-based payment charges) profitability next year, although the group will continue to reportstatutory losses for the foreseeable future. Current forecasts suggest the company will report an operating loss of 61m for 2016, 54m for 2017 and 54m for 2018.
As part of Monitises drive to cut costs the company hasdecided to shrink its board, with two non-executive directors both set to leave.
Its no secret that Monitise is struggling to survive. The mobile money company has consistently missed forecasts since it hit the market back in 2007 and the City has lost patience with the company as it struggles for direction.
On the other hand, one of Monitises competitors,Worldpay (LSE: WPG), is surging ahead, and the City seems to be extremely excited about the companys prospects.
Indeed, Worldpays initial public offering was the biggest the London market has seen this year, raising 948m and valuing the business at 4.8bn. Worldpay is already a leader in global payments, and the companys valuation has nearly tripled since 2010. Private equity groupsAdvent and Bain Capital bought Worldpay from Royal Bank of Scotland in 2010 for 1.7bn.
Earlier this month Worldpay announced that it would be receiving a windfall fromVisa Incs acquisition of Visa Europe for 16.5bn in cash and shares. Worldpay owns just under 10% of Visa Europe.Worldpays portion of the consideration will total 1.25 billion, including an upfront cash payment of 592m and a further 374m inVisa shares. Worldpay will get a further 283m in deferred compensation based on Visa Europe hitting certain earnings targets.
Last year Worldpay recorded sales of 3.6bn and EBITDA of 375m. Unfortunately, these figures suggest that Worldpay is one of the most expensive companies in the payments sector. The company is currently trading at an enterprise value to EBITDA multiple of more than 18. Even MasterCard and Visa are cheaper bets. These two payment processing behemoths currently trade at EV/EBITDA multiples of 17.9 and 14 respectively.
Back to 10p?
So, can Monitise head back to 10p, or should you give up on the company and buy Worldpay instead?
Well, as Monitise is set to report losses of 169m during the next three years, its almost impossible to justify a high valuation for the company. However, Worldpays eye-watering valuation is hardly attractive either. With this being the case, Im looking elsewhere for deals.
One company that’s recently attracted my attention is revealed in this free report.
Our analysts believe that the business in question isone of the market’s “top small caps” and could have apotential upside of 45%! Moreover, the company in question has a substantial cash balance, provenadvantageand is supported by some of the biggest players in its industry.
If you’d like to find out more, download thefree report today— but hurry, it’s only available for a limited time.