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Unlike other market commentators, I do not accept payments to talk positively about stocks. The below is purely my own opinion, which can also be wrong. It is not financial advice, please do your own research. I always disclose if I hold a position.

It’s been a few weeks!

Mainly because I’ve not had much to say, and to write something for the sake of writing is a fool’s errand.

There were some stocks I wanted to mention, but by the time I’d started writing about them they’d moved significantly.

There isn’t really any value in me telling people I bought something way cheaper, especially if I’d no longer buy it at this price.

However, one stock I have bought recently is one I believe is appearing more attractive for a takeover.

To be clear - I’m not buying the stock because I think it’ll be taken over.

That would be silly.

People were saying Fevertree was a sitting duck for Coca-Cola and Schweppes for years, and what happened instead was Coca-Cola brought out its own premium mixer and Schweppes released Schweppes 1783.

So buying a stock because you think it will get taken over really is just silly.

However, if you like the stock and think it has upside potential and can get taken over, then that is an added bonus, which is the case for PCI Pal (PCIP) (I hold).

PCIP is a stock I’ve held on an off throughout the years, and it’s had a turbulent history.

But now, I feel the risk/reward is the best it’s ever been for this business, and the growth that was promised is starting to show.

That said, there is a little niggle here. I hold shares but it’s important to note that the results have been delayed.

I don’t like this, but in the same announcement the company said that ARR and contracted ARR have both increased further.

The company is an enviable position as growth is ramping up. The software, once embedded, is a hassle to remove.

Ring a call centre to pay a bill and you’re often asked to read your card number out to a stranger. PCI Pal exists to stop that. You tap the digits into your keypad, type them into a chat window or say them to a bot, and PCI Pal takes the payment through its own cloud platform, so the card data never touches the agent or the client’s systems.

The client stays on the right side of the card industry’s rules and out of the next data-breach headline.

PCI Pal makes its money from software subscriptions. Recurring revenue was 91% of FY25’s £22.5 million, with licences typically running for 12 months and then rolling over automatically.

But you might be surprised to hear most of it is sold by somebody else.

Contact-centre platforms such as Genesys, NICE, Zoom, RingCentral, Five9 and Amazon Connect resell it, and partners signed 83% of new contracts in the first half. BT has since joined them a few weeks ago.

Management made a decision to push profitability out further to chase growth - a decision I supported.

The UK business is big, but the US TAM is huge. Land grabbing multiple geographies and investing for growth brings scale, and profits will come eventually.

HMRC has just re-signed for eight years, and PCI Pal is no stranger to local authorities and even the DWP.

The balance sheet was shored up with a placing at 56p - again, I told management I’d like to see a placing - because private investors would look at a stretched balance sheet and be put off buying until there was one or it was clear one wouldn’t be needed.

There was a little dilution here, but with the spurious case from Semafone (now Sycurio) out of the way, and actually leaving Sycurio worse off (muppets), the business can finally focus on growth.

Cash is expected to fall as marketing spend is ramped up, but there is an undrawn £3 million debt facility from HSBC so ample liquidity.

Here’s the chart over the last few years.

The lawsuit took several years to conclude, and whilst some would’ve argued that PCI Pal should’ve settled, this would’ve been playing into Sycurio’s hands.

It’s exactly what they wanted, and if you settle, you send a message of weakness. What’s to stop someone else having a pop?

Thankfully, that’s now out of the way, and growth is back on the menu.

One thing I’ll be querying management about is why US revenue dipped slightly, given that it’s a big open market ripe for the taking.

Here’s the recent price action.

The market has taken note with volumes increased and a rise since the publishing of the trading update in July.

So it’s no longer as cheap as it was.

But I like momentum, and with the price peeking out above levels not seen since October 2021, I’ve rebought here.

There has been minimal dilution since then, and whilst rates are much higher now, the company is in a much stronger position in terms of revenue, growth, and opportunity, without the lawsuit round the neck.

Again, please do your own research!

But if you have any thoughts - I’m always open to hearing.

Speak soon!
Michael

P.S. Let me know if you get the free share worth £100.