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17 November 2020 | Buy

BUY | Tyro Payments Limited


Cashed up and growing

Tyro Payments Limited (ASX:TYR) is a $2bn established leader in the Australian payments market.

In the past decade, the company has become the largest non-bank supplier of EFTPOS terminals and payments software with over 32,000 clients primarily in the retail, hospitality, and healthcare industries.

Clearly by virtue of having businesses as customers and particularly those in physical retail and hospitality means the impact of the COVID-19 restrictions has been significant, however, this also provides substantial recovery potential and we believe that one of the eventual outcomes of the pandemic will be acceleration towards cashless, contactless payments in which Tyro leads the way technologically.

It is worth noting that even amidst the worst of the COVID-19 shutdown Tyro maintained growth in both customer numbers and transaction value, highlighting the resilience and strength of its offerings which have also been extended to include online retailing payments systems and associated software.

TYR recently announced a major strategic alliance with Bendigo-Adelaide Bank which represents the #5 EFTPOS terminal player tying up with the #5 retail bank, and should deliver a step-change in both customer numbers (terminals) and transaction value ($5bn).

Even after the Bendigo deal, TYR will retain a very strong balance sheet (net cash ~ $120m) providing funds for organic and acquisition-based growth.

We believe that as restrictions are lifted, physical retail sales transaction value should rise, boosting TYR’s turnover and revenues significantly, making TYR a ‘recovery’ play despite its technological leadership in its space.

After hitting $4.40 less than two weeks ago, general market weakness has seen TYR shares drop 18% in recent trading sessions, despite positive company updates. We, therefore, see the sell-off as overdone and current prices represent an opportunity to add a high-quality technology-driven leader which should continue to benefit from the structural tailwind of consumers dropping cash in favour of cards.


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