PI’s Sangha raises target on Points International to $25

Sangha says certain major contracts have become very impactful for Points International. He believes the deal with Southwest’s Rapid Rewards Loyalty Membership program will be worth “tens of millions of dollars annually once fully implemented in mid-2013.”Points International (TSX:PTS) reported its Q4 and fiscal 2012 results today. For the year, the company earned $8.26-million on revenues of $139.5-million. For the quarter, Points reported revenue of $40.8-million, which was a 19% over the $32.9-million topline the company reported in Q4 of last year, but was below the consensus estimate of $46.2-million.

CEO Rob MacLean said 2012 was just a warmup to the company’s next fiscal year.

“Ultimately, our success in 2012 has set the foundation for accelerated growth in 2013. Total 2013 revenues are forecasted to be in the range of $200-million to $220-million, an increase of approximately 50 per cent year over year. Driving this acceleration in top-line growth is continued organic growth within our existing business as well as the partial-year contribution from currently signed or announced new business slated to launch in 2013. While on a preinvestments basis, we would expect to deliver approximately $10-million to $13-million of EBITDA [earnings before interest, taxes, depreciation and amortization], we have made the strategic decision to reinvest a portion of our incremental profitability, in the range of $2-million to $3-million, to continue to drive innovation and expansion of our core business. Notably, we will look to add enhanced mobile capabilities to our platform, expand our payment functionality, boost our data analytics and invest in our open-platform efforts. We are confident that our progress in 2012 coupled with the strategic investments slated for 2013 will position the platform for growth in both revenues and profitability in 2014 and beyond.”

PI Financial analyst Pardeep Sangha says this is exceptionally strong guidance. He says the company’s Q4 fell below his expectations, but says management has a high degree of confidence its projections, as they are based, in part, on already announced partner programs such as the recently announced Southwest Airlines deal. He says the company’s large pipeline should indeed make for a much better fiscal 2013. In a research update to clients today, Sangha maintained his BUY rating and raised his target price on Points International by five dollars to $25.

Toronto-based Points International lives at the corner of technology and loyalty programs, which these days is a good place to be. Points International manages the back end of loyalty currencies, frequent flyer miles, hotel points, retailer rewards and credit card points. The company has more than fifty partners worldwide including Delta, BestBuy, Starbucks and PayPal. Points has grown its revenue from $30 million in 2007 to the $139.5-million it reported for fiscal 2012 today.

Sangha says certain major contracts have become very impactful for Points International. He believes the deal with Southwest’s Rapid Rewards Loyalty Membership program will be worth “tens of millions of dollars annually once fully implemented in mid-2013.” He notes that during the past year, the company has launched or announced 25 new products with eight new partners, including Wyndham Hotels, Melia Hotels, and Aéromexico.

Shares of Points International closed today up 17.8% to $15.20.

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