BPS TECHNOLOGY SHARES SLIDE AFTER IPO
Written on the 11 September 2014 by Nick Nichols
BPS Technology (ASX: BPS) has made a weak start to its first few days of trading with its shares sliding as much as 13 per cent below their issue price.
The $1 shares fell to a low of 87c on Thursday as the company this week detailed an expansion strategy that will involve acquisitions with the US emerging as one of its more lucrative targets.
The group this week became the Gold Coast’s newest listed company, but the business behind it, Bartercard, has been operating for more than two decades.
BPS raised $28 million in July aimed at pushing the Bartercard business to a broader market globally with a plan to snare profitable businesses in the highly fragmented trade-exchange sector.
Bartercard, founded on the Gold Coast in 1991, has become the world’s biggest trade exchange with trading volumes of about $820 million a year.
BPS estimates there are 2000 trade exchanges operating globally transacting more than $US20 billion in goods and services a year and growing about 15 per cent annually.
BPS Technology’s CEO Trevor Dietz says the US will play a major role in that growth with the company already making inroads in what it describes as the “highly strategic” east coast.
“The public listing gives BPS Technology an appropriate capital structure to pursue the company’s long-term growth strategy of expanding its existing operations further into key markets such as the US and UK,” Dietz says.
“The highly fragmented nature of the global trade exchange market also creates a range of growth opportunities through a combination of organic growth and targeted acquisitions of other trade exchanges.”
BPS Technology reveals it has sold a second region on the US east coast, as well as its first franchise in the region.
“We have significant growth agenda for our business with plans to establish 20 new regions in the US over the next five years,” Dietz says.
The foundation of the BPS business rests in the technology it has developed to service the trade-exchange sector.
This comprises the TESS trade exchange software platform and Bucqi, a loyalty platform and a B2C payment platform.
BPS Technology collects royalties from the platforms which, along with transaction fees and sign-up fees and franchise fees for new territories, is expected to generate revenue of $51.6 million this financial year.
BPS Technology has forecast a net profit after tax of $6.5 million for the 2015 financial year and a 7.25c dividend per share.
Bartercard, which has more than 300 staff globally in 75 offices, processes transactions through 24,000 merchants and 54,000 cardholders across Australia, NZ, UK, USA, Thailand, United Arab Emirates and Cyprus.
The company says it will be primarily focused on business-to-business transactions and loyalty programs and plans to increase cardholder numbers to 100,000 by 2016.
The business will generate revenue through fees it charges for each transaction, as well as sign-up fees and franchise fees for new territories.
It is targeting revenue of $51.6 million this financial year.
BPS Technology shares last traded at 92c.
Author: Nick Nichols