GAXC is still undervalued.

A recent online friend of mine wrote this update on his blog. This is talking about GAXC and as you know I bought 20,000 shares of it at $.93 and now its at $1.06. Thanks Ian for your research. Not to mention he went down to Florida to meet the CEO and have dinner and ask questions about this investment.

GAXC DVD Kiosks

Transaction processors and ATM companies have received a lot of positive press this past week. Barrons and AP both put out bullish articles on the industry and Global Axcess’s (GAXC) closest comparable, Cardtronics (CATM).

From Barrons Article: Transaction Processors See Some Action

For the month of December, group average 2009 and 2010 price/earnings multiples increased to 17.9 times and 15.0 times from 16.7 times and 14.1 times, respectively. 2009 and 2010 group average Ebitda multiples also increased to 10.4 times and 8.9 times from 9.9 times and 8.6 times, respectively.

From AP Article: Payments Processors outlook

Among smaller payments processing companies, Mammone recommends Cardtronics Inc. for 2010. He rates the stock as a “Buy” and set an $18 price target for the company, which operates thousands of ATMs across the U.S., United Kingdom and Mexico.

Conclusion:

Global Axcess (GAXC) at $1.00 per share is trading at about half of its peer group average. Deutsche Bank analyst Christopher Mammone has an $18 price target on Cardtronics (CATM) which when you break it down is valuing it at 21x the average 2010 EPS estimate. Global Axcess will likely grow net income yr/yr at a higher growth rate then Cardtronics. After reading both articles and doing a peer analysis and analyst expectation analysis, GAXC is considerably undervalued. GAXC’s ATM division alone should be currently valued over $2.00 share. My GAXC baseline EPS estimate for 2010 is 13-14c (40%+ EPS growth) which doesn’t include additional ATM wins or any DVD kiosk contribution. A baseline price target on GAXC would be close to $3.00 by using comp PE analysis. With additional ATM or DVD kiosk wins/contribution, GAXC’s price target would increase considerably.

Disclosure: LONG GAXC and continuing to add to my position
www.iancassel.com