Visa Inc. (V) Ariel Benton Financials Analyst. Theo Harrison Financials Analyst. November 7, 2017

Transcription

1 Visa Inc. (V) November 7, 2017 Ariel Benton Financials Analyst Theo Harrison Financials Analyst

2 Table of Contents Investment Thesis Competitors Company Overview & History Technical Analysis Management & Governance Fundamental Analysis Market SWOT Recent News Recommendation

3 Investment Thesis

4 Investment Thesis Company: Qualitative: #1 credit and debit network worldwide Visa Europe integration Leader in payment & verification technologies Open loop network = does not bear credit risk Quantitative: Recurring revenues Low capital expenditures High operating margins High free cash flow Volume & revenue growth Macro: Global shift toward card-based and electronic payments

5 Company Overview & History

6 Company History 1958: BankAmeriCard issued by BofA 1973: BankAmeriCard launches first electronic payment system 1976: BankAmeriCard becomes Visa 1983: Visa launches the first ATM, providing cash anytime, anywhere 1986: Visa develops multiple-currency clearing system - 21 countries 1989: Visa offers the first electronic signature capability 1993: The first in its industry to enable neural network tech. to fight fraud 2007: Visa incorporates, becomes global Visa Inc. 2008: Visa launches mobile platform and IPO 2016: Visa Inc. completes acquisition of Visa Europe

7 Company Overview Global payments technology company One of the most well known brands in the world Visa is everywhere you want to be Partnerships with financial institutions & merchants

8 Company Overview

9 What is Visa?

10 Company Footprint 3.1 billion account holders 44 million merchant locations 16,600 financial institution clients 160 currencies Over 200 countries & territories

11 Company Facts

12 Revenue Breakdown 1. Service: earned for services provided in support of client usage of Visa products 2. Data Processing: Earned for authorization, clearing, settlement, network access and other maintenance and support services that facilitate transaction and information processing among our clients globally 3. International Transactions: Earned for cross-border transaction processing and currency conversion activities 36% 34% 24% 6%

13 Governance

14 Management Vasant Prabhu Chief Financial Officer Alfred Kelly Chief Executive Officer Jim McCarthy Global Head of Innovation Lynne Biggar Chief Marketing Officer

15 Market/Macro

16 Market IYG has returned 40.39% YTD Visa is 6.78% of IYG portfolio Financials and insurance account for ~8% of US GDP Jerome Powell new Fed Chair echoes many of Yellen s beliefs

17 Dodd Frank Durbin Amendment within Dodd Frank a. b. c. Businesses may now set a minimum charge for credit card purchases of up to 10 dollars. (apart from a few states whose state laws forbid it) The Federal Reserve can cap debit transaction fees that businesses pay. Businesses must have a choice of debit networks that processes their transactions.

18 Consumer Trends In 2016, Visanet processed 141 billion transactions with a total volume of $8.9 trillion VisaNet includes the processing of credit card transactions while debit card payments are processed by banking networks and ATM s Increased in credit card usage propelled by growth in ecommerce and mobile transactions

19 Non-Cash Transactions

20 Recent News

21 Recent News Acquisition of Visa Europe Completed in June 2016 Transitioning from cash to electronic Tax benefits Launch of Visa Direct in Europe Real-time payment system P2P, B2B, B2C payments Partnership with WorldPay Unrivalled space in Europe Visa ID Intelligence Provided to issuers, merchants, and processors Leading authentication technologies Identity documents Biometrics Replace traditional methods

22 Technical Analysis

23 Technical Analysis

24 Competitors

25 Open Loop vs. Closed Loop Open Loop Payment Network Closed Loop Payment Network Open-loop payments networks are multi-party and operate through a system that connects two financial institutions one that issues the card to the cardholder, known as the issuing financial institution or issuer, and one that has the banking relationship with the merchant, known as the acquiring financial institution or acquirer and manages information and the flow of value between them. In a typical closed-loop payments network, the payment services are provided directly to merchants and cardholders by the owner of the network without involving third-party financial institution intermediaries. Examples: Visa and Mastercard Examples: American Express and Discover

26 Multiples Analysis vs. Open Loop Metrics Visa MasterCard Market Cap $256B $155B P/E (forward) ROA (5 yr. avg.) 12% 23.05% ROE (5 yr. avg.) 16.50% 46.19% Operating Margin (5 yr. avg.) 62.08% 53.62% LT D/E (2016)

27 Multiples Analysis vs. Closed Loop Metrics Visa American Express Discover Market Cap $256B $57B $20B P/E (forward) ROA (5 yr. avg.) 12% 3.27% 3.05% ROE (5 yr. avg.) 16.50% 26.54% 24.19% Operating Margin (5 yr. avg.) 62.08% 21.96% 40.25% LT D/E (2016)

28 Competitors Performance

29 Financial Highlights

30 Payments Volume Growth Fiscal year ended September 2017

31 Transactions Growth

32 Revenue Growth

33 Margin Growth

34 Fundamental Analysis

35 Model

36 Sensitivity Analysis

37 SWOT Analysis

38 SWOT Analysis Strengths: Largest market share in the world Strong supply chain and branding through advertising Operate the world s largest economic retail electronic payments network (VisaNet) Duopoly within open-loop network Weaknesses: High exposure to risk and fraud Litigation risks Opportunities: Cashless economies in developing and emerging markets Digital currency Chinese market expansion Threats: Stringent economic policies in different countries Highly competitive environment

39 Recommendation

40 Recommendation Purchase 74 shares at $ Total investment of $8,262.08

41 Portfolio Allocation Correl. Coefficient w/ BAC: 0.44

42 We would now like to open the presentation to any questions.