Cuscal books management meetings for IPO

Cuscal-Visa Host Card Emulation software will offer tap and go payments on Android smartphones. Picture: iStock

Payments infrastructure company Cuscal will start meeting with investors from this Friday as party of its formal management roadshow for its $336.8m initial public offering.

The deal will be one of the few to come to market this year as investors remains cautious amid a weaker economy and with rising interest rates.

Also potentially weighing on the result one way or another will be the outcome of the US election.

But Cuscal’s owners have made efforts to list before and the thinking is that while it has secured some funds, it is yet to have the deal fully accounted for, so the reception from investors at the next two weeks of management roadshows will be critical.

It will no doubt be keen to get a deal done before interest rates start to fall, given the company hold funds from customers from which it earns interest and adds to its overall profits.

Ord Minnett and Bell Potter have been added to the bench along with Bank of America to shore up additional funds, particularly from their retail broking networks.

The IPO was priced two weeks ago at $2.50 per share, which provides it with a $479.1m market value when it is scheduled to list on the Australian Securities Exchange in December.

This was after a process was launched to lock in cornerstone investors that will commit to the deal up front.

The price equates to 7.7 times its earnings before interest, tax, depreciation and amortisation for the 2025 financial year and a dividend yield of 3.7 per cent.

The company is promoting itself as debt free, with only $40m of the $336.8m raise a primary raising.

The group had already met with fund managers in Asia so they could familiarise them with the company after earlier talking to Australian investors for less formal meetings.

Cuscal is being pitched as a group with a strong track record of earnings growth and like somewhat of an annuity-style investment.

Now making $30m of annual earnings, it has grown over time and there’s an opportunity to grow market share while keeping costs fixed, providing the possibility for higher margins.

The business provides security and data analysis and is a payments infrastructure services provider, offering business-to-business services for institutional clients such as corporates, banks, credit unions, fintech groups, and superannuation funds.

These include credit cards, mobile banking and payments apps, BPAY, ATM services, data management and fraud services.

Cuscal planned to list last year but pulled the pin in November during challenging market conditions.

Its initial plan was to have a $514m market value, and the last selldown size discussed was $292m.

Its owners include Bendigo and Adelaide Bank, MasterCard and other mutual banks, and it had hired Bank of America, Ord Minnett and Bell Potter for the initial public offering last year.

The price equated to 9.4 times EBITDA for the 2024 year.

Analysts at Bank of America have estimated that Cuscal is worth between $527m and $656m on a “pre-money” or equity valuation.

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.

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

The other deal coming to market through Jarden is the Victoria-based civil construction and equipment hire company Symal raising $136m through an IPO.

The share price will be $1.85 and equates to four times its annual EBITDA and the company will list with a $437m market value on November 21.

Symal is run by founder and group managing director Joe Bartolo.

It comes after Guzman y Gomez listed earlier this year, raising $335.1m.