Good post. One thing to note about the earnings outlook for this year and next: Pax prices most of their products in USD and EUR, while most of their costs are in RMB. Therefore, a stronger USD vs. RMB, as we've seen this year, helps profit margins.
Thanks Folkert. They operate in similar spaces and have overlap for some merchant customers, but Pax solutions are geared more towards high transaction volume and larger clients, whereas Square is more for smaller businesses. So competitors to an extent, but also complementary.
Nov 7, 2022·edited Nov 7, 2022Liked by Pyramids and Pagodas
For an a mainly r&d based company it's 10 year average r&d margins seem kind of low in the 7-10% region while a company like square has a 15% margin and lightspeed has closer to 30% margin.
The selling and marketing expenses have been higher than R&D over the last 10 year
Is the company spending enough on R&D to maintain its moat?
Hey Mannsher, PAX's other top two global competitors have averaged the same at around 10%. The Company is spending capex to upgrade their HQ and R&D center, as well build up its Huizhou industrial park (targeted Q423). Having a manufacturing cluster should help with synergies within its supply chain and improve long term economics (higher margin), technology and quality of products. So in short, we believe so.
We touch upon this around 35:00 mark; there wasn't much to come out of it post-Palo Alto Networks audits. Management was pretty good at addressing market concerns, and this was further allayed through their recent interim report, which saw USCA segment grow 27% for despite the raid late 2021.
Nice writeup. I'm significantly more bullish on Pax in my own model than you guys are. Think the obligatory PE cost cuts that we've seen already from Verifone/Ingenico will help Pax gain share. Importantly unlike before, Android POS has very high returns to scale with their app marketplaces(much like smartphones); I suspect Verifone and Ingenico will regret giving up share in the short term.
Nice writeup. I'm significantly more bullish on Pax in my own model than you guys are. Think the obligatory PE cost cuts that we've seen already from Verifone/Ingenico will help Pax gain share. Importantly unlike before, Android POS has very high returns to scale with their app marketplaces(much like smartphones); I suspect Verifone and Ingenico will regret giving up share in the short term.
Good post. One thing to note about the earnings outlook for this year and next: Pax prices most of their products in USD and EUR, while most of their costs are in RMB. Therefore, a stronger USD vs. RMB, as we've seen this year, helps profit margins.
Thanks Patches. I think we might have mentioned it in the video presentation, but that definitely helps, great observation.
Thanks for the write-up, very insightful! Do you see Square as a direct competitor?
Thanks Folkert. They operate in similar spaces and have overlap for some merchant customers, but Pax solutions are geared more towards high transaction volume and larger clients, whereas Square is more for smaller businesses. So competitors to an extent, but also complementary.
Excellent write-up! I'd be happy to see the model mentioned. Bless :)
Thanks and sure, sent!
Thank you for sharing this investment idea!
I would be interested in the model if possible.
Thanks and no worries, sent!
For an a mainly r&d based company it's 10 year average r&d margins seem kind of low in the 7-10% region while a company like square has a 15% margin and lightspeed has closer to 30% margin.
The selling and marketing expenses have been higher than R&D over the last 10 year
Is the company spending enough on R&D to maintain its moat?
Hey Mannsher, PAX's other top two global competitors have averaged the same at around 10%. The Company is spending capex to upgrade their HQ and R&D center, as well build up its Huizhou industrial park (targeted Q423). Having a manufacturing cluster should help with synergies within its supply chain and improve long term economics (higher margin), technology and quality of products. So in short, we believe so.
any idea what happened with the FBI raid?
We touch upon this around 35:00 mark; there wasn't much to come out of it post-Palo Alto Networks audits. Management was pretty good at addressing market concerns, and this was further allayed through their recent interim report, which saw USCA segment grow 27% for despite the raid late 2021.
thanks for sharing, very good job, I would be interested in the model if you can share it, best regards
Thanks and no problem, sent!
Thanks for the idea. Would be interested in the model if possible.
I've just discovered your post, found it recently on Tweeter. Is it your model still available? If not, don't worry. Thanks for sharing your thesis.
Just came across this idea and looks very interesting. Could you send the model across? Thanks
Nice writeup. I'm significantly more bullish on Pax in my own model than you guys are. Think the obligatory PE cost cuts that we've seen already from Verifone/Ingenico will help Pax gain share. Importantly unlike before, Android POS has very high returns to scale with their app marketplaces(much like smartphones); I suspect Verifone and Ingenico will regret giving up share in the short term.
Would be interested in seeing your model too.
Nice writeup. I'm significantly more bullish on Pax in my own model than you guys are. Think the obligatory PE cost cuts that we've seen already from Verifone/Ingenico will help Pax gain share. Importantly unlike before, Android POS has very high returns to scale with their app marketplaces(much like smartphones); I suspect Verifone and Ingenico will regret giving up share in the short term.
Would be interested in seeing your model too.
Thanks for sharing this great post. Would be possible to have the model?
May I get this model as well? Thank you so much! I'm also invested in PAX, with a core full position (5%).