金融科技行业三大并购股对比

1、GPN/FIS/FISVTale of the Tape - Comparing and Contrasting the Big 3 Mergers Stocks in FinTechIn this report, we compare and contrast the “big 3” merger stocks, and while we like and see healthy upside for all three, our preference from favorite to least favorite is GPN (OW), FIS (N), and FISV (N).Bus

2、iness mix favors GPN. Fiserv wins in terms of scale and defensibility, but Global Payments offers the optimal mix of growth and payment assets.We like FIS deal the most based on merit. FIS adding Worldpay represents the largest step-up in asset quality, though we still find it curious that Worldpay

3、sold when it did from a position of strength. Fiserv/First Data likely makes the most financial sense with Fiserv using its strong stock currency to acquire FDC at a low multiple, plus opportunity to refinance high-coupon First Data debt.GPN ranks as fastest top-line grower and relies the least on r

4、evenue synergies, which we prefer. Reliance on revenue synergies is greatest for FIS in year two, and FIS isnt as reliable on delivering revenue upside relative to cost.FIS margins should climb the most as a result of the high contribution margin of premium grower Worldpay. FISVs margin expansion is

5、 the most dependent on expense synergies, followed by GPN (nearly half) and then FIS (38%). The latter argues that FIS margin expansion is more driven by operating mix, while GPN has a balanced mix of both. We expect all three to live up to their reputations of being strong in executing cost synergi

6、es.Leverage is highest at FISV, and unsurprisingly a higher mix of interest savings benefits to EPS, which we view as low-risk growth. FIS and GPN will be at 2x leverage by 2021, giving these firms the freedom to execute more M&A, whereas FISV is projected to be closer to 3x, suggesting it may have

7、to wait a little longer to get back in the M&A game.Valuations look similar. The three stocks trade at 18-19x CY21 earnings and 14x EBITDA. Taking the weighted average multiples for the companies pre-merger, FISVs multiple has moved the most, up 18% compared to FIS multiple up only 4% and GPNs multi

8、ple up 10% since 2018 levels. Given GPNs faster growth rate, we see greater upside, hence our preference and OW rating.North America Equity Research30 October 2019Payments, Processors & IT ServicesTien-tsin Huang, CFA AC(1-212) 622-6632 HYPERLINK mailto:tien-tsin.huang tien- HYPERLINK mailto:tsin.hu

9、ang tsin.huangBloomberg JPMA HUANG J.P. Morgan Securities LLCReginald L. Smith, CFA(1-212) 622-6743 HYPERLINK mailto:reginald.l.smith reginald.l.smithJ.P. Morgan Securities LLCPuneet Jain(1-212) 622-1436 HYPERLINK mailto:puneet.x.jain puneet.x.jainJ.P. Morgan Securities LLCHitesh Malla(91-22) 6157-3

10、897 HYPERLINK mailto:hitesh.malla hitesh.mallaJ.P. Morgan India Private LimitedEquity Ratings and Price TargetsCompanyTickerMkt Cap ($ mn)Price ($) Rati Curng PrevCur Price TargetEndPrev DateEnd DateGlobal PaymentsGPN US48,960.00163.20OWn/c198.00Dec-20n/cn/cFISFIS US81,712.50130.74Nn/c146.00Dec-2015

11、3.00n/cFiserv, Inc.FISV US42,097.86105.35Nn/c119.00Dec-20n/cn/cSource: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 29 Oct 19.See page 49 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do bu

12、siness with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. HYPERLINK /

13、 Table of Contents HYPERLINK l _bookmark0 PM Summary3 HYPERLINK l _bookmark1 Business Mix3 HYPERLINK l _bookmark2 Not All Merchant Solutions Are Created Equal4 HYPERLINK l _bookmark3 Synergy Opportunities in Issuer Processing5 HYPERLINK l _bookmark4 Regional mix6 HYPERLINK l _bookmark5 Assessing the

14、 Merits of the Deals6 HYPERLINK l _bookmark6 Assessing the Management Teams7 HYPERLINK l _bookmark7 Financial profile comparison8 HYPERLINK l _bookmark8 Thoughts on acquisition synergies HYPERLINK l _bookmark9 11 HYPERLINK l _bookmark10 Valuation13 HYPERLINK l _bookmark11 Establishing CY20 Price Tar

15、gets for FISV/GPN14 HYPERLINK l _bookmark12 FinTech Business profiles15 HYPERLINK l _bookmark13 FISV15 HYPERLINK l _bookmark14 FIS16 HYPERLINK l _bookmark15 Merchant Acquiring Business description HYPERLINK l _bookmark17 16 HYPERLINK l _bookmark16 FDC HYPERLINK l _bookmark18 16 HYPERLINK l _bookmark

16、19 Worldpay18 HYPERLINK l _bookmark20 GPN19 HYPERLINK l _bookmark21 TSS19 HYPERLINK l _bookmark22 Appendix I: Merchant Acquiring 10120 HYPERLINK l _bookmark24 Merchant Acquirer and Processor Economics24 HYPERLINK l _bookmark25 U.S. Merchant Acquiring Snapshot25 HYPERLINK l _bookmark26 Acquiring Mark

17、et Share Shift Through Time26 HYPERLINK l _bookmark27 Merchant Acquiring Distribution Going Tech29 HYPERLINK l _bookmark28 Plenty of Opportunity to Support New Entrants30 HYPERLINK l _bookmark29 Merchant Acquiring Consolidation33 HYPERLINK l _bookmark30 Appendix II: Bank Processing 10135 HYPERLINK l

18、 _bookmark31 What Is Core Banking?35 HYPERLINK l _bookmark32 Payment Services38 HYPERLINK l _bookmark33 Global Payments40 HYPERLINK l _bookmark34 FIS43 HYPERLINK l _bookmark35 Fiserv, Inc.46PM SummaryIn this report, we compare and contrast the “big 3” merger stocks, and while we like and see healthy

19、 upside for all three, our preference from favorite to least favorite is GPN (OW), FIS (N), and FISV (N). Valuations are currently similar based on 2021 metrics, so our bias is to prefer GPN since it offers faster growth with less reliance on revenue synergies to get there.Business MixOur view: Fise

20、rv wins in terms of scale, but Global Payments offers the most optimal mix of growth assets. Advantage GPN, then FIS, followed by Fiserv.To properly compare the mix of businesses across the three merger stocks, we simplistically unpacked them into four segments:Merchant Solutions. Merchant acquiring

21、 and processing servicesproviding payment acceptance services via a variety of channels on behalf of merchants. Providers are ultimately billing merchants for completing transactions tied to a product/service sold by the merchant. In developed markets, we view this as a mid- to high-single-digit gro

22、wth business.Issuer Solutions. Providing payment enabling solutions on behalf of issuers. Providers are ultimately billing the issuer or owner of a financial instrument that represents the buying counterparty. In developed markets, we view this as a low- to mid-single-digit growth business with more

23、 concentrated buyers than the merchant business.Financial Solutions. Providing account processing and related services to financial institutions. In developed markets, we view this as a low- to mid-single- digit growth business and less cyclical than the merchant and issuer segments as fees are typi

24、cally tied to active accounts rather than spend.Other includes everything else that doesnt fit well within the above categories. Examples include GPNs Netspend business (prepaid issuing) and FIS legacy Sungard business (brokerage services) and IT Outsourcing unit.The table below summarizes each firm

25、s business mix across the four aforementioned segments. GPN has the greatest exposure to merchant acquiring, while FIS has the most diversified revenue mix, and FISV has the greatest exposure to issuer processing (legacy FISVs payments and FDCs issuer processing).Table 1: Business MixServices mixInd

26、ustry GrowthFISFISVGPNIssuer SolutionsLow-to-Mid Single22%47%20%Merchant SolutionsMid-to-High Single32%37%60%Financial SolutionsLow-to-Mid27%16%Others *GDP +/-19%20%Total pro forma revenue (CY20)$13.5b$15b$9bSource: J.P. Morgan estimates. * Others include capital market solutions at FIS, and Netspen

27、d and software revenue at GPN. Notes: Industry growth represents developed market growth in digits.We believe GPNs mix offers the highest growth potential, given secular trends in merchant acquiring and its investment and exposure to some of the faster growing areas in payments (e.g., integrated sof

28、tware, eComm, etc.).FISs diversified business mix appears to be a plus versus the group, which coupled with a step-up in asset quality with Worldpay should offer an attractive growth profile above that of Fiserv, but beneath GPN.FISV benefits from having the most scale across the group and a higher

29、mix of payment assets (defined as merchant and issuer) than rival FIS. Fiserv has been investing in its P2P and other Digital Channels, which should be attractive for its relatively smaller-sized customers, and should also benefit from technology investments in core FDC products like Clover that can

30、 be sold to its bank base.Not All Merchant Solutions Are Created EqualOur view: GPN and FIS both offer a nice mix of faster growing tech-enabled assets, with GPN being more levered to SMEs and FIS more levered to larger merchants and e-comm. Advantage goes to GPN and FIS, followed by Fiserv.We belie

31、ve Merchant Solutions offers the fastest growth potential of all core segments of the big three merger firms. Distribution and channel mix can greatly influence growth rates in merchant acquiring, which has historically been a scale and sales driven model. However, technology is changing the growth

32、equation as merchants are increasingly entrusting their tech partner (as opposed to their bank or payment service provider) to handle their payment needs on an integrated basis.To take a more granular look at the merchant services businesses across the three firms, we categorized them into two bucke

33、ts:Tech-enabled. Tech-enabled can be defined as merchant services being distributed or consumed via technology. Examples include (1) integrated payments, where the payment function is embedded inside of software or hardware being sold to the merchant. The merchant services provider might own the har

34、dware (e.g., First Datas Clover) or software (e.g., GPNs AdvanceMD, TouchNet software solutions) outright or partner with ISVs and dealers (e.g., legacy Worldpays Vantiv Integrated Payments Division or TSYSs Cayan) that sell directly to merchants. (2) E-commerce payment processing. The Tech- enabled

35、 market is growing in the mid teens in developed markets and taking share from the traditional market.Traditional. The traditional market can be defined as merchant services sold via banks and feet-on-the-street (direct or indirect sales). We estimate about half of the U.S. merchant acquiring market

36、 is bank-driven by virtue of banks leveraging their branch footprint and cross-selling merchant services to business banking customers. We estimate the bank market to be growing below market averages in the low single digits in developed markets.Below we summarize our estimation of merchant mix acro

37、ss the three firms. While FISV commands a greater mix of merchant acquiring revenues than FIS, it is more exposed to traditional distribution (namely bank channel, even after loss of BAC). FIS, on the other hand, has the smallest relative exposure to merchant acquiring but a larger mix of eCommerce,

38、 cross-border, and integrated payments, all comfortably growing in the double digits. GPN has pivoted toward tech-enabled distribution,eCommerce, and owned-software in recent years, and TSS could actually increase its mix of slower growing wholesale merchant acquiring at the margin, by our estimate.

39、 Nonetheless, GPN has the highest mix of desired merchant content.Figure 1: FIS & GPN: Tech Enabled vs. Traditional Merchant RevenueFigure 2: FISV: Tech Enabled vs. Traditional Merchant Revenue MixTech-EnabledTraditionalTech-EnabledTraditionalSource: Company reports and J.P. Morgan estimates.Source:

40、 Company reports and J.P. Morgan estimatesScale matters as well in Merchant Solutions, and ranked from largest to smallest are FISV ($5.7B in merchant acquiring revenue), GPN ($5.4B in revenue), and FIS ($4.3B in revenue).Synergy Opportunities in Issuer ProcessingOur view: Fiserv gains the most pote

41、ntial for cost cutting and diversification plus scale, whereas FIS and GPN will rely more on tangential revenue synergies.Advantage goes to Fiserv here.We see opportunities for expense and (some) revenue synergies among the issuer processing businesses of merchant acquirers and card processing segme

42、nts of legacy core processors.Both of these businesses help financial services firms (e.g., banks or card issuers) issue and maintain debit and credit cards and offer corresponding account processing services. The services include a variety of licensed or outsourced offerings areas such as card appl

43、ication, tokenization, card personalization and mailing, transaction processing, customer communications, loyalty program management, and fraud detection/prevention, etc.We believe potential overlap of services should offer potential cost synergy opportunities in duplicate business functions (e.g.,

44、rationalization opportunities in tech, potentially in platforms, and in sales). Moreover, with greater scale, the firms should be able to attract better terms from suppliers ranging from telecom services to networks, and seeing more flow should enhance the firms fraud and error rates.Revenue synergi

45、es will be harder to come by relative to expense synergies, in our view. However, each firm benefits from filling gaps in products and capabilities. For example, the addition of First Datas issuer solutions gives Fiserv, a classic debit issuer, exposure to the private label card space, and to a less

46、er degree credit.Interesting synergy opportunities include cross-selling fraud/token/security capabilities into each others install base, as well as enhancing authorization rates byvirtue of seeing more transactional activity. The latter has been difficult to achieve, so we will study the potential

47、here as more information becomes available.Regional mixOur view: FIS wins with the most geographically diversified revenue base. GPN and FISV claim the same high mix of North America revenue (84%), but we prefer GPN since it has a higher mix of SME clients where profit pools are greater than FISVs m

48、ix of larger merchants and FIs.FIS appears to be most diversified with North America contributing only about two- thirds of total revenue. We believe the companys presence in Asia-Pac (specifically India) and LatAm offers a beachhead to sell WPs solutions into those regions, while Worldpays high sha

49、re in Europe offers potential for FIS to further penetrate the region.Legacy Fiserv was known as a U.S. business with 90%-plus of revenue generated in the U.S., primarily from financial institutions. Adding First Data gives Fiserv some modest LatAm and Asia-Pac exposure, and we will monitor how mana

50、gement will prioritize scaling up these businesses.Global Payments adding TSS actually increases GPNs U.S. exposure, making its North America exposure similar to that of Fiserv.Table 2: Regional MixRegional mixFISFISVGPNNA65%84%84%EMEA24%10%14%Asia-Pac5%2%3%LatAm6%4%nmSource: J.P. Morgan estimates,

51、company data.Assessing the Merits of the DealsOur view: We like the FIS/Worldpay deal the most as adding Worldpay represents the largest step up in asset quality, in our view. Fiserv/First Data likely makes the most financial sense with Fiserv using its strong stock currency to acquire FDC at a low

52、multiple and also refinance high-coupon First Data debt. We view the GPN/TSS merger as a deal for scale in the payments space.Consolidation has been a theme in FinTech for the last several years, exaggerated by these three large deals announced earlier this year for a combined merger value of more t

53、han $100 billion. While we didnt predict these deals specifically, they are consistent with our thesis that calls for a growing divide between bank-based distribution and tech-based distribution models and a reliance on scale to gain/protect share.Core Bank Processing Finally Joining Forces w/ Merch

54、ant Processing at Scale Legacy core processors FIS and FISV historically shied away from scale merchant acquiring. So what changed? Our simple answer is that they recognized that banks need scaled solutions to compete against pure-play tech challengers like Adyen,Square, and Stripe. We believe banks

55、 have 50% share in U.S. merchant acquiring,donating share to the tech challengers. By buying merchant acquiring assets, FIS and FISV can better assist their bank clients to use technology (and scale/pricing) to complement their traditional lending and treasury services to compete against disruptors.

56、Fiserv has a solid mix of smaller banks that have been under-represented in servicing their small and larger business banking customers with merchant acquiring solutions. First Data has a culture of working with banks, evidenced by its bank JV model (Citi, PNC, Wells, etc.), and some nice tech asset

57、s including Clover, a cloud-POS solution built for SMEs that competes directly against Square. The opportunity (and challenge) will be energizing smaller banks to leverage First Datas merchant toolkit to satisfy the growing needs of SMEs looking for better technology (to run their businesses better)

58、 embedded with payments. Competition is sharp, with several pure-play tech firms and a growing list of ISVs being payment facilitators, all with the same goal in mind of winning the payment relationship with merchants.FIS also has a nice install base of small U.S. banks under-represented in merchant

59、 acquiring, but the more interesting opportunity might be to cross-sell Worldpay global acquiring solutions to FISs larger global bank clients. Worldpay has strong multi-currency, cross-border acquiring services well suited for international banks. Tech pure play Adyen has thrived on servicing the g

60、lobal payment needs of merchants, and Worldpay could receive a boost in the same market opportunity by leveraging FIS international bank presence. That said, sales cycles for selling merchant services on an agency or JV basis to international banks can be quite long, so patience might be required.As