Net 1 Ueps Technologies Inc. has a market cap of $681.1 million; its shares were traded at around $15.01 with a P/E ratio of 10 and P/S ratio of 2.8. UEPS is in the portfolios of David Dreman of Dreman Value Management, Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Manning & Napier Advisors, Inc, Ron Baron of Baron Funds, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates.
Highlight of Business Operations: Favorable impact from the weakness of the US dollar: Emerging market currencies were negatively impacted by the global financial crisis during the last three months of calendar 2008 and the first half of calendar 2009. The US dollar depreciated by 24% compared to the ZAR during the third quarter of fiscal 2010 compared to fiscal 2009 which has had a positive impact on our reported results; Increased transaction volumes at EasyPay: Our reported results were favorably impacted by increased transaction volumes at EasyPay resulting from growth in value-added services; Increased revenue from MediKredit at lower operating margins than other transaction-based activity business: Our MediKredit acquisition positively impacted on our revenue during the third quarter of fiscal 2010, however, MediKredit generates a lower operating margin than our other transaction-based activity businesses and therefore lowered our reported segment margins; Increased user adoption in Iraq: Our reported results were positively impacted by increased transaction revenues from the adoption of our UEPS technology in Iraq; Lower revenues and margins from hardware, software and related technology sales segment: Our hardware, software and related technology sales segment continues to be adversely impacted by lower revenues, primarily as a result of fewer ad hoc sales to the Bank of Ghana when compared to a year ago, and overall margin pressure at Net1 UAT and weaker demand for our products as well as pricing pressures resulting from the global recession, all of which was partially offset by hardware sales to Iraq; Intangible asset amortization related to acquisitions: Our reported results were adversely impacted by additional intangible asset amortization of approximately $0.5 million related to the RMT acquisition, which closed in April 2009 and $0.5 million related to the MediKredit acquisition, which closed in January 2010; and Non-recurring items: During the third quarter of fiscal 2009 we recognized a loss on the sale of our traditional microlending business of $0.7 million (ZAR 7.4 million). 25
Our direct costs of maintaining a listing on Nasdaq and obtaining a listing on the JSE, as well as compliance with the Sarbanes-Oxley Act of 2002, or Sarbanes, particularly Section 404 of Sarbanes, includes independent directors fees, legal fees, fees paid to Nasdaq and the JSE, our compliance officers salary, fees paid to consultants who assist with Sarbanes compliance and fees paid to our independent accountants related to the audit and review process. This has resulted in expenditures of $0.6 million (ZAR 4.5 million) and $0.4 million (ZAR 4.1 million) during the third quarter of fiscal 2010 and 2009, respectively.
Interest on surplus cash for the third quarter of fiscal 2010 decreased to $2.5 million (ZAR 18.8 million) from $4.3 million (ZAR 42.6 million) for the third quarter of fiscal 2009. The decrease in interest on surplus cash held in South Africa was due to a lower average daily ZAR cash balance during the third quarter of fiscal 2010 compared with the third quarter of fiscal 2009 and lower deposit rates resulting from the adjustment in the South African prime interest rate from an average of approximately 14.32% per annum for the third quarter of fiscal 2009 to 10.47% per annum for the third quarter of fiscal 2010. The lower cash balances resulted primarily from our repurchase of our shares from Brait S.As investment affiliates in August 2009.
Interest expense decreased during the third quarter of fiscal 2010 due to a decrease in the average rates of interest on our short-term facilities and the elimination of our obligation to provide prefunded social welfare grants to provincial governments. In ZAR, finance costs decreased to $0.2 million (ZAR 1.5 million) for the third quarter of fiscal 2010 from $2.1 million (ZAR 21.4 million) for the third quarter of fiscal 2009.
Read the The complete Report