3pea International, Inc. (NBB:TPNL)  – GeoTeam to Track Designer and Developer of Payment Solutions

3pea International, Inc. (NBB:TPNL) ($0.25) designs and develops payment solutions including proprietary payment terminals, secure key loading systems, prepaid card systems, and various payment services. Will begin tracking due to management forecasting record revenue and net income for 2014. Reasons for tracking:

  • After 3 years of unimpressive growth (including first half of FY 2014) management is  forecasting record revenue and net income for 2014. Manny insert guidance.
  • It appears the company has invested capital to scale its business.
  • Improved its web portal to enhance the customer experience- Manny copy and paste 2nd bullet from year end highlight.
  • Focusing on selling higher margin products.
  • Company is in the process of expanding its customer base.

According to the company description on its most recent 10Q filing,

“We have developed prepaid card programs for healthcare reimbursement payments, pharmaceutical co-pay assistance, corporate and incentive rewards and expense reimbursement cards. We plan to expand our product offering to include payroll cards, general purpose re-loadable cards, and travel cards. Our cards are offered to end users through our relationships with bank issuers. “

We generally are attracted to companies that offer outsourcing to it customer base, especially in markets where cost reduction is a strong theme, such as the health insurance industry. According to the company, network branded prepaid cards allow consumers to have better control over their budget while these cards work like traditional debit/credit cards and offer many of the same fraud and loss protections. They access funds pre-paid for the cardholder that have been loaded by either the cardholder, another consumer (as a gift), the government for benefits, employers/corporations for payroll, or by a corporation for rewards/incentives, or health benefits. As a non-credit payment tool, they help the users control their budget.

Network branded prepaid cards are relatively new, but incredibly useful financial tools for millions of Americans. Network branded prepaid cards provide consumers, businesses and governments with the efficiency, security and flexibility of digital payments through a non-credit payment option. Most network branded prepaid cards benefit from broad acceptance, as they can be used anywhere the card brand (Amex, Discover, MasterCard, Visa) credit/debit card is accepted and they provide the end user security against fraud and theft.

The company claims it has enough capital to sustain operations for the next 12 months. Although shares are trading at a reasonable TTM P/E of 25, based on a TTM EV to adjusted EBITDA of 14.0 and an EV to sales of 0.6. Shares could offer some upside from current levels.  We will request an interview with management.

Caveat:

Need to verify managements claim to raise money. Volatile chart over last year, current ratio is less than one.