Bank of America analysts ascribe value to float prospect Cuscal

Bank of America is working on the listing of Australian payments company Cuscal. Picture: AFP

Analysts at Bank of America are estimating that payments company Cuscal is worth between $527m and $656m ahead of its initial public offering later this year.

The Wall Street bank working on the deal released its analyst research on the business on Monday, stating what it believed the group’s “pre-money” or equity valuation was.

The range implied 14.1 times to 17.5 times earnings forecast for the 2025 financial year, or 8.3 to 10.3 times earnings before interest, tax, depreciation and amortisation, including debt, based on its anticipated annual earnings.

It comes after Cuscal recently locked in cornerstone investors and priced its IPO at $479.1m market value, with shares to be sold at $2.50 each and a raising of $336.8m.

The price equates to 7.7 times its EBITDA for the 2025 financial year and a dividend yield of 3.7 per cent.

The group’s expected net profit for the 2025 financial year is $37.5m and they believe it can sustain EBITDA margins at about 21.5 per cent.

Analysts say Cuscal is uniquely positioned with Australian payments infrastructure as the only non-major bank with full connectivity, licensing and a long-tenured, diversified client base.

“Its history of earnings and dividend growth has capitalised on higher transaction volumes underpinned by ongoing investment, market share gains, the shift away from cash and structurally higher payments velocity.”

The analysts said that they saw further growth opportunities from targeted investments, major bank market share erosion, adjacencies and potential for inorganic growth.

Also, potential Reserve Bank of Australia regulatory changes to merchant card payments and surcharging could benefit Cuscal longer-term through increased non-cash transactions and higher debit card market share.

Transaction volumes would drive Cuscal’s revenue with top-line growth resilient despite slower consumer spending and regulatory pressures.

They assume net fee and commission revenue growth moderates to over 7 per cent for fiscal 2025.

Cuscal’s owners include Bendigo and Adelaide Bank, MasterCard and other mutual banks.