Pluxee is one of my largest positions (largest by initial investment) and I believe it offers a great opportunity without much cyclical risk and a straight forward growth story. However I'd push back on 4x EV/EBITDA. You can debate what the enterprise value of Pluxee should be. Their net cash calculation includes float, which in my opinion should be excluded. I get to around 7x EV/EBITDA using a net debt position, still a bargain for a business expected to grow EBITDA >10% in an oligopoly.
Looks like a bargain, thanks Robin. I got 2 shares from Sodexo spinoff, I'll consider topping my position (and investing in competitor Edenred at the same time).
As I understand it from the situation I can imagine best: during lunch break I buy lunch at a merchant in the network and pay by pluxees digital solution.
I enjoy it most if the food is tasty and I am served quickly, thus if businesses near by are added my (end user-) experience gets worse. If too many merchants are added (without end users) sales per merchant drop and keeping the pluxee solution embedded might not be worth it if there are some costs related. Correct?
So a balanced growth (end users per nearby merchants) would be important?
I have chosen EV/EBITDA as the comparables are more diversified in other parts of the market. If you choose P/E, the result is similar.
Yes, I agree. As you say, it is a balance between the two.
For a merchant it is more expensive to work with Pluxee than with Visa for example. But Pluxee attracts more customers than Visa (in principle) and that should offset the costs. In addition, it takes longer for the merchant to receive the money with Pluxee than with Visa.
On the other hand, users will be frustrated when they see that their money cannot be spent anywhere. It is therefore important that there is a wide network of merchants where the funds can be spent. So you need to have a strong network effect both on the customer side and on the merchant side.
Personally, I am an Edenred user and it is really frustrating to see how a restaurant used to accept it and now does not. What's more, you often don't know until the last moment whether they will accept or not. When that happens, you are very disappointed.
That's why both sides of the network have to be very careful.
”but Pluxee attracts more customers than Visa and that should offset the costs. In addition, it takes longer for the merchant to receive the money with Pluxee than with Visa.”
What costs? There are no additional costs. Pluxee reimburses the merchant when customer buys something. There are no other additional costs if there are no transactions
In my personal experience, when I use a similar service in a restaurant, they sometimes surprisingly stop accepting the card. When you ask why, they talk about the time it takes to collect the money.
When I say 'cost', it is not a cost as such, but it means that the business needs more money to operate because it has to wait longer. And perhaps the way to get more money to operate is to increase its debt.
What I mean is that it is not all profit for the merchant, but since there are many people with this type of card who can only spend in restaurants, this 'inconvenience' of getting the money later is compensated by increasing the flow of customers.
I never have had this kind of issues with these services. I know some merchants also who consider these big value added because of bigger customer flow and information about their service. Thanks for the reply, interesting take have to think about this
Pluxee is one of my largest positions (largest by initial investment) and I believe it offers a great opportunity without much cyclical risk and a straight forward growth story. However I'd push back on 4x EV/EBITDA. You can debate what the enterprise value of Pluxee should be. Their net cash calculation includes float, which in my opinion should be excluded. I get to around 7x EV/EBITDA using a net debt position, still a bargain for a business expected to grow EBITDA >10% in an oligopoly.
Thanks for your comment! Interesting point about removing the float to get a more realistic valuation.
Thanks for this write up. I recently wrote up this stock from the standpoint of the controversies currently swirling around it. It’s free, so hopefully I can leave the link here. Just looking for feedback basically. https://mostlycharts.substack.com/p/high-conviction-idea-bountiful-benefits
You are most welcome, thank you very much for sharing!
Great write-up! Heavy moat investing introduced me to the stock some months ago! It is currently a real bargain! Also leaps available
Just came across this write up. Well done Robin
Looks like a bargain, thanks Robin. I got 2 shares from Sodexo spinoff, I'll consider topping my position (and investing in competitor Edenred at the same time).
Is ev/EBITDA the right multiple to look at?
As I understand it from the situation I can imagine best: during lunch break I buy lunch at a merchant in the network and pay by pluxees digital solution.
I enjoy it most if the food is tasty and I am served quickly, thus if businesses near by are added my (end user-) experience gets worse. If too many merchants are added (without end users) sales per merchant drop and keeping the pluxee solution embedded might not be worth it if there are some costs related. Correct?
So a balanced growth (end users per nearby merchants) would be important?
I have chosen EV/EBITDA as the comparables are more diversified in other parts of the market. If you choose P/E, the result is similar.
Yes, I agree. As you say, it is a balance between the two.
For a merchant it is more expensive to work with Pluxee than with Visa for example. But Pluxee attracts more customers than Visa (in principle) and that should offset the costs. In addition, it takes longer for the merchant to receive the money with Pluxee than with Visa.
On the other hand, users will be frustrated when they see that their money cannot be spent anywhere. It is therefore important that there is a wide network of merchants where the funds can be spent. So you need to have a strong network effect both on the customer side and on the merchant side.
Personally, I am an Edenred user and it is really frustrating to see how a restaurant used to accept it and now does not. What's more, you often don't know until the last moment whether they will accept or not. When that happens, you are very disappointed.
That's why both sides of the network have to be very careful.
”but Pluxee attracts more customers than Visa and that should offset the costs. In addition, it takes longer for the merchant to receive the money with Pluxee than with Visa.”
What costs? There are no additional costs. Pluxee reimburses the merchant when customer buys something. There are no other additional costs if there are no transactions
In my personal experience, when I use a similar service in a restaurant, they sometimes surprisingly stop accepting the card. When you ask why, they talk about the time it takes to collect the money.
When I say 'cost', it is not a cost as such, but it means that the business needs more money to operate because it has to wait longer. And perhaps the way to get more money to operate is to increase its debt.
What I mean is that it is not all profit for the merchant, but since there are many people with this type of card who can only spend in restaurants, this 'inconvenience' of getting the money later is compensated by increasing the flow of customers.
I never have had this kind of issues with these services. I know some merchants also who consider these big value added because of bigger customer flow and information about their service. Thanks for the reply, interesting take have to think about this