24th Oct 2023 11:49
(Alliance News) - CAB Payments Holdings PLC shares slumped on Tuesday following the ignominy of an earnings warning so soon into its stint as a publicly-listed company.
Shares in the company slumped 73% to 57.50 pence in London on Tuesday morning. The firm floated in July at 335p per share. The stock has nosedived 83% since then. The FTSE 250 stock now has a market capitalisation of GBP146.1 million.
Its shares are likely to continue facing some selling pressure until it wins back the market's confidence, analysts at Liberum predicted.
The cross-border payments and foreign exchange firm now expects annual revenue to be "at least" 20% ahead of the GBP109.4 million achieved in 2022. This is about "17% below previously issued guidance", however, CAB added.
It expects the "majority of any revenue impact" will hit its bottom line, but will be seeking opportunities to lessen the hurt.
"In recent weeks, the company has seen a number of changes to the market conditions in some of its key currency corridors, on top of the ongoing uncertainties surrounding the naira, which are impacting both volumes and margins; most notably, the Central African franc and West African franc. At the present time, these market conditions are compressing margins and reducing trading volume," CAB explained.
The naira is the currency of Nigeria. The Central African franc is used in Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon. The West African franc is used in Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo.
"These challenges are recent but continuing, and coincide with the traditionally strong fourth quarter for both of these corridors; it is unclear when and to what extent conditions in these markets may improve," CAB warned.
"To this point in 2023, the company has signed 74 new customers and is confident these customers will deliver good growth into the future. However, should the current market conditions persist in some of our key currency corridors, as described above, the softer exit rate from 2023 could result in 2024 revenue growth falling below the medium-term potential."
CAB Payments does not specifically say why the markets it mentioned have struggled. However, Liberum believes this is down to "several" military coups and a default. However, the broker said CAB's management had previously reassured about the impact of these events.
"Management had been asked about the impact of these at the time but they said it was not material," Liberum explained.
On where the company goes from here, Liberum added: "In a nutshell, management's reputation is in tatters. While we think the underlying business has a strong proposition with a large market, management's inability to foresee events and guide is a major concern."
Liberum right now rates CAB at 'buy' with a 480p price target, It began coverage of the stock with that recommendation back in August.
By Eric Cunha, Alliance News news editor
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