Mobile banking is growing rapidly in both developed and emerging markets as smartphones become more affordable and consumers get used to the idea of making payments with their phone, creating a rare opportunity for whatever company can create the best infrastructure and software to deliver this service worldwide. BTIG analyst Mark Palmer thinks that Monitise Plc (LON:MONI) (OTCMKTS:MONIF) might be that company, initiating coverage with a Buy recommendation and a 92p price target (currently 64p).

Unlike many of its competitors that are trying to build payments systems and mobile wallets from the ground up, Monitise Plc (LON:MONI) (OTCMKTS:MONIF) has developed an interface that connects smartphones to banks’ existing payment infrastructure so that incorporating the new feature is relatively painless and the time to market is low.

 

Monitise aims for 200 million users in 2018

“Unlike those companies attempting to circumvent the existing payments infrastructure, Monitise has created a mobile pathway to it,” Palmer writes.

As of the end of 2013, Monitise Plc (LON:MONI) (OTCMKTS:MONIF) had 28 million users and plans to hit more than 200 million by June 2018 (Palmer’s 92p PT is based on 12x guidance for FY2018 EBITDA of £200 million with an 8% discount), and if that sounds ambitious Palmer’s not the only one who thinks the company will deliver.

“[Monitise] has guided to 30%+ EBITDA margins and 200mm+ users by June 2018. While those numbers provide a very attractive return profile from last sale, our numbers are higher than company guidance and as such we have continued to accumulate shares,” wrote Lee Cooperman in the last Omega Advisors letter to investors.

Visa, MasterCard both onboard

It’s not just investors who like the company. Visa Inc (NYSE:V) has been a significant shareholder for years, and Visa Europe invested in 2011, owning 5.8% and 6.6% respectively. Mastercard Inc (NYSE:MA) invested in the company in March and announced its intention to work with Monitise Plc (LON:MONI) (OTCMKTS:MONIF) to develop and deploy its services more quickly. Collectively, these companies represent billions of account holders, so winning their support is a huge leg up over anyone that tries to challenge Monitise in the future.

The only significant rival that Monitise Plc (LON:MONI) (OTCMKTS:MONIF) had was Clairmail, until Monitise bought it out for $173 million two years ago. The most significant threat to Monitise’s business plan is probably in-house teams working on their own mobile banking infrastructure, but Monitise has recently switched to a subscription-bases SaaS model that lowers upfront costs and should help convince banks to outsource their mobile banking products.