MA - Mastercard

[atbed]

The average next twelve month (NTM) PE has been 20.6x since the IPO. It's been 23.3x the last three years.

[physcdisp]

Mastercard has sold off a lot vs VISA.  Any folks here who know why this is the case.  MA was historically carried slightly higher multiple than V and now at current that has reversed.  Thanks

[fisch777]

Not sure, MA will soon have the real deal Visa, Inc. to compete with across Europe instead of a 3000-bank-owned consortium.

 

V/MA are two of the finest businesses on earth, arguing which one is better or which should have a higher multiple is not worth your time in my experience. 

[Liberty]

Q4:

 

http://s2.q4cdn.com/242125233/files/doc_news/2016/4QFY15-Earnings-Press-Release.pdf

 

http://s2.q4cdn.com/242125233/files/doc_presentations/2016/4QFY15-Earnings-Presentation.pdf

 

http://s2.q4cdn.com/242125233/files/doc_financials/supplemental/2016/Supplemental-Operational-Performance-Data-2015Q4.pdf

[rishig]

Q4:

 

http://s2.q4cdn.com/242125233/files/doc_news/2016/4QFY15-Earnings-Press-Release.pdf

 

http://s2.q4cdn.com/242125233/files/doc_presentations/2016/4QFY15-Earnings-Presentation.pdf

 

http://s2.q4cdn.com/242125233/files/doc_financials/supplemental/2016/Supplemental-Operational-Performance-Data-2015Q4.pdf

 

Thanks Liberty. I found the q call this morning to be pretty useless. Analysts are focused on trying to get their models right - all the questions are about the little changes that occurred in the numbers. This kind of minutiae does not help to judge how the competitive landscape is changing (or not changing). Overall, fx headwinds are a big problem, but that's a temporary issue imo.

 

Here is my 15 year spreadsheet with data from latest Q:

https://docs.google.com/spreadsheets/d/1YIdhJxUHy9CAP7xMa4gC3oYaxFmAUmkjPhqqxfeBXQc/edit?usp=sharing

[Liberty]

Q4:

 

http://s2.q4cdn.com/242125233/files/doc_news/2016/4QFY15-Earnings-Press-Release.pdf

 

http://s2.q4cdn.com/242125233/files/doc_presentations/2016/4QFY15-Earnings-Presentation.pdf

 

http://s2.q4cdn.com/242125233/files/doc_financials/supplemental/2016/Supplemental-Operational-Performance-Data-2015Q4.pdf

 

Thanks Liberty. I found the q call this morning to be pretty useless. Analysts are focused on trying to get their models right - all the questions are about the little changes that occurred in the numbers. This kind of minutiae does not help to judge how the competitive landscape is changing (or not changing). Overall, fx headwinds are a big problem, but that's a temporary issue imo.

 

Here is my 15 year spreadsheet with data from latest Q:

https://docs.google.com/spreadsheets/d/1YIdhJxUHy9CAP7xMa4gC3oYaxFmAUmkjPhqqxfeBXQc/edit?usp=sharing

 

I share your frustration with analyst questions. I find that most of the conference calls that are worth listening to are those where management is in some way exceptional (often owner-operators) and brings up interesting things on their own (strategy, long-term, market structure, etc). Most of the analysts are just looking to fill in the holes in their Excel spreadsheets, though there are exceptions there too.

 

Thank you for sharing your data on MA, much appreciated.

[xtreeq]

Thanks for the spreadsheet Rishi

[rishig]

Q4:

 

http://s2.q4cdn.com/242125233/files/doc_news/2016/4QFY15-Earnings-Press-Release.pdf

 

http://s2.q4cdn.com/242125233/files/doc_presentations/2016/4QFY15-Earnings-Presentation.pdf

 

http://s2.q4cdn.com/242125233/files/doc_financials/supplemental/2016/Supplemental-Operational-Performance-Data-2015Q4.pdf

 

Thanks Liberty. I found the q call this morning to be pretty useless. Analysts are focused on trying to get their models right - all the questions are about the little changes that occurred in the numbers. This kind of minutiae does not help to judge how the competitive landscape is changing (or not changing). Overall, fx headwinds are a big problem, but that's a temporary issue imo.

 

Here is my 15 year spreadsheet with data from latest Q:

https://docs.google.com/spreadsheets/d/1YIdhJxUHy9CAP7xMa4gC3oYaxFmAUmkjPhqqxfeBXQc/edit?usp=sharing

 

I share your frustration with analyst questions. I find that most of the conference calls that are worth listening to are those where management is in some way exceptional (often owner-operators) and brings up interesting things on their own (strategy, long-term, market structure, etc). Most of the analysts are just looking to fill in the holes in their Excel spreadsheets, though there are exceptions there too.

 

Thank you for sharing your data on MA, much appreciated.

 

I wouldn't put MA management in this category. It seemed like they spent the entire hour on trying to baby sit the analysts, so they could get their projections right to double degree precision for 2016. It was the worst one hour I spent at 6:00 AM.

[Liberty]

I wouldn't put MA management in this category. It seemed like they spent the entire hour on trying to baby sit the analysts, so they could get their projections right to double degree precision for 2016. It was the worst one hour I spent at 6:00 AM.

 

Yeah, I didn't mean to imply that MA management was like this. I was actually thinking of Mark Leonard at Constellation Software when I wrote this. His conference calls don't have any prepared remarks, he goes straight to questions. He doesn't take much BS and will readily admit when things are not working out or turning differently than he expected. He talks a lot about strategy, how his industry works, how he tries to create incentives within the company to accomplish certain things, what metrics are important to him, talks about long-term goals, etc. Same with his letters.

 

He's even stopped getting any compensation from the company and only benefits as a large shareholder.

 

If only all management was like this...

[Liberty]

They're buying VocaLink for about a billion:

 

http://investor.mastercard.com/investor-relations/investor-news/press-release-details/2016/MasterCard-Announces-Acquisition-of-VocaLink/default.aspx

 

They had a call about it. Slide said EBITDA margins are 43%, but they said they expect to bring them north of 50%. Goal is international expansion, said think could get revenue growth close to MA levels. If that's the case, seems like the ±9x EBITDA multiple paid is pretty low.

[Liberty]

Q2: http://investor.mastercard.com/investor-relations/investor-news/press-release-details/2016/MasterCard-Incorporated-Reports-Second-Quarter-2016-Financial-Results/default.aspx

 

The company reported net income of $983 million, an increase of 7% or 8% on a currency-neutral basis, and earnings per diluted share of $0.89, up 10% or 11% on a currency-neutral basis versus the year-ago period. Excluding special items related to separate U.K. merchant litigations taken in both this quarter and the previous year’s quarter, the company reported net income of $1.1 billion, an increase of 10% or 11% on a currency-neutral basis, and earnings per diluted share of $0.96, up 13% or 14% on a currency-neutral basis versus the year-ago period.

 

Net revenue for the second quarter of 2016 was $2.7 billion, a 13% increase versus the same period in 2015. On a currency-neutral basis, net revenue increased 14%. [...]

 

During the second quarter of 2016, MasterCard repurchased approximately 5 million shares of Class A common stock at a cost of $462 million. Quarter-to-date through July 21, the company did not repurchase any additional shares, which leaves $2.7 billion remaining under the current repurchase program authorization.

[TheAiGuy]

Some links of interest:

 

http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692

http://www.frbsf.org/cash/publications/fed-notes/2014/april/cash-consumer-spending-payment-diary

 

 

[Jurgis]

http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692

 

OT. I'm with libertarians on this: removing cash - even when people are talking about $100 note - is a stepping stone to police state. It is like war on drugs: removing just $100 won't work, so what's next? Removing $50 - already talked about in the same breath as removing $100. Then what? Removing $20? Banning cash?

 

We need NCA - National Cash Association. Government is coming for your cash. More important for freedom than your guns probably.  ::)

[TheAiGuy]

We need NCA - National Cash Association. Government is coming for your cash. More important for freedom than your guns probably.  ::)

 

http://www.pennies.org

 

[Liberty]

After Visa,

 

PayPal Strikes Deal with MasterCard to Allow Payments in Stores

 

http://www.wsj.com/articles/paypal-strikes-deal-with-mastercard-to-allow-payments-in-stores-1473154200

[Liberty]

Mastercard sued for $19 billion in Britain's biggest damages claim

 

http://www.reuters.com/article/us-mastercard-lawsuit-britain-idUSKCN11E2S9

[oddballstocks]

http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692

 

OT. I'm with libertarians on this: removing cash - even when people are talking about $100 note - is a stepping stone to police state. It is like war on drugs: removing just $100 won't work, so what's next? Removing $50 - already talked about in the same breath as removing $100. Then what? Removing $20? Banning cash?

 

We need NCA - National Cash Association. Government is coming for your cash. More important for freedom than your guns probably.  ::)

 

Needed cash to buy an RV from a private seller.  I called the bank, they went into a panic.  They need a WEEK lead time to get cash.  I didn't have a week, they swung it anyways.  I was told that the branch rarely has much more than $10k on hand.  This is the busiest branch in the network for a $5b+ bank.  I had to deal with the manager, he said the bank sees cash as needed by used vehicle/thing purchasers and by those trying to hide income from the IRS.  He said government barely acknowledges that anyone would need cash for legitimate reasons.

[TheAiGuy]

http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692

 

OT. I'm with libertarians on this: removing cash - even when people are talking about $100 note - is a stepping stone to police state. It is like war on drugs: removing just $100 won't work, so what's next? Removing $50 - already talked about in the same breath as removing $100. Then what? Removing $20? Banning cash?

 

We need NCA - National Cash Association. Government is coming for your cash. More important for freedom than your guns probably.  ::)

 

Needed cash to buy an RV from a private seller.  I called the bank, they went into a panic.  They need a WEEK lead time to get cash.  I didn't have a week, they swung it anyways.  I was told that the branch rarely has much more than $10k on hand.  This is the busiest branch in the network for a $5b+ bank.  I had to deal with the manager, he said the bank sees cash as needed by used vehicle/thing purchasers and by those trying to hide income from the IRS.  He said government barely acknowledges that anyone would need cash for legitimate reasons.

 

I think you're overstating the overreaching government motive here. The point is that the use of a paper currency is less efficient than an electronic currency. There are far more steps, greater likelihood for loss, fewer economies of scale in managing the transactions, etc. The argument is that these factors will naturally drive most transactions to be electronic over time, even private sales of vehicles, and that the portion of large transactions that are illegal will grow overtime as legitimate transactions move electronic, giving regulators incentive to accelerate the transition to electronic payments.

 

[Liberty]

MA Q1:

 

http://s2.q4cdn.com/242125233/files/doc_financials/2017/1Q17-MA-Earnings-Release.pdf

 

• First-quarter net income of $1.1 billion, or $1.00 per diluted share

• First-quarter adjusted net income of $1.1 billion, or $1.01 per adjusted diluted share • First-quarter net revenue increase of 12%, to $2.7 billion

• First-quarter adjusted gross dollar volume up 8% and purchase volume up 9%

• VocaLink acquisition completed

DEPS up 16%

[LongTermView]

http://www.barrons.com/articles/why-mastercard-hasnt-been-disrupted-1509478859

[Liberty]

Q3: http://s2.q4cdn.com/242125233/files/doc_financials/2017/Q3/3Q17-MA-Earnings-Release.pdf

 

 

[gary17]

Does anyone know if mobile payment apps like Wepay  and alipay and apple pay are direct competition of mastercard/visa?

Could mobile payment evolve to a point where it's just sending money /credit between buyer and seller and cut the credit card guys out completely?

TIA

[TheAiGuy]

Does anyone know if mobile payment apps like Wepay  and alipay and apple pay are direct competition of mastercard/visa?

Could mobile payment evolve to a point where it's just sending money /credit between buyer and seller and cut the credit card guys out completely?

TIA

 

Generally speaking, payments exist in localities.  By that, I mean that there is a lot of variance in how payments are handed from place to place. Wepay/alipay don't really directly compete with visa/MA that much as off now (but they off course could in the future). This recent article about payments in Europe may be interesting to that regard https://t.co/CZs19LqlL4

 

Your second question is deeply speculative. Personally, I think it is unlikely that US consumers will start using Alipay or that Chinese consumers will start using Visa (domestically, in both cases).

[rist.tom]

I was thinking the same thing....just watched a short WSJ video (

) this morning that showed how popular these apps are in China.  I bet the same is true for other high population developing areas like India, Indonesia, and parts of Africa.  They comprise around half (or more) of the world's population, so this would be a huge missed opportunity for V and MA. 

 

The only way I see this catching on the Western world is if merchants started offering small discounts for direct mobile payment (not something like Apple Pay where a credit card is still used).  If credit card fees average 3%, I could see a change in behavior if stores offered a 1 or 2% discount.  I live in Chicago, which implemented a 7 cent bag tax last year and it had a huge impact...bag use dropped by 45% in groceries. (source: https://www.dnainfo.com/chicago/20171020/lincoln-square/bag-tax-plastic-litter-grocery-shopping-revenue-paper).  Even though it doesn't affect most people's wealth, people like saving small amounts on purchases.

 

 

[TheAiGuy]

(...) If credit card fees average 3%, I could see a change in behavior if stores offered a 1 or 2% discount.  (...)

 

This is a common misconception. The fee charged by V/MA is a small fraction of these fees, on the order of low double digit basis points. The lion's share of these fees are charged by your bank and the merchants bank.