Visa 1Q numbers - eating into cash transactions

Visa takes you places. It is far easier than at any time to access your funds, no matter where you are. It is difficult to believe that the first ATM turns 50 this year, it is known that cash is still used amongst many, see the recent crisis in India with the notes removal from circulation to know how many people are completely reliant on the physical "stuff". I recall recently ABSA working with Visa to integrate fingerprint technologies on their ATMs (Visa testing biometric verification). Cash remains, electronic transactions and the associated technologies are on the rise, replacing the old methodologies. You will recall from the piece that was included in links the other day about "money" that cowries (the beautiful shell) used to be a means of currency in wide parts of our continent, see - Shell money.

Enough, that is history. Nowadays we use less cash than ever before, as you will see below. For the time being, let us deal with the business of Visa's First Quarter 2017 Results. Operating revenues rose by 25 percent to 4.5 billion Dollars, net income of 2.1 billion Dollars represented a 7 percent increase from this time last year. Remember that this is only the second quarter that includes the entire European business in Visa global.

Earnings per share rose 7 percent to 86 US cents. The company bought back 1.8 billion Dollars of shares in the quarter at an average price of 79.77 Dollars, 3.9 billion Dollars of the buyback is still authorised, around 2 percent of the current value of all shares in issue. As we said in the last report, around 30 percent of all the shares in issue have been bought back since listing in March 2008, mark this down to around one-third once this current program is finished. Remember that the accelerated buybacks are to minimise the dilution of the Visa Europe purchase. Cash on hand, 13.2 billion Dollars, loads left for small bolt on acquisitions of interesting new payment areas.

The new chief, Alfred F. Kelly (junior) sounds pretty upbeat, he has whizzed around the world in his first quarter as the head of the business and sounds confident in the team and the regulatory framework, as well as importantly, their customers. As he points out on the conference call (courtesy SeekingAlpha - Earnings Call Transcript), the entire network is 44 million merchants strong, connecting them to 16 thousand financial institutions. He also points out all the new innovations to keep them current, I think that it is very important for shareholders to understand that this business wants to be at the forefront.

It is also difficult to believe that in some countries cash still gets a fair usage, obviously the bigger payments of all sorts are done electronically, many smaller transactions (small grocery purchase etc.) are done in bills and cents. Here however is a sign that these payments are all slowly changing. I downloaded and read a report titled World Payments Report 2016. You'll have to register there, unfortunately, it takes a couple of minutes. Once done, you can download the report, and whilst the data is not fresh, you get the "trend" which is important.



I recall that in the Visa annual report, when we looked at this business the last time, that cash and checks in Europe represented 37 percent of all personal expenditure across the region, as Visa said at the time, this was a 3.3 trillion Dollar growth opportunity. Cash is still in the purse, pocket and wallet of hundreds of millions of people, a card is a foreign concept. India and China however are set to be huge markets for Visa, the brand is well recognised and the systems are seamless, something we take for granted. Governments want less cash in issue, more electronic trails. The growth story for Visa is simple and definitely intact. The stock always looks perpetually expensive, and whilst the stock trades 27 times forward 2017 guidance, it represents "good value". We continue to buy this stock, which should always represent a core part of your portfolio. A great, long term opportunity. The stock is set to open at an all time high, up 3.4 percent to 85.10 Dollars.