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Points International: Solid Pipeline Monetization With the Addition of Southwest Airlines

 November 29, 2012 04:37 PM

(By Mani) Points International Ltd. (NASDAQ: PCOM) (TSE: PTS) announced the addition of Southwest Airlines (NYSE:LUV) as a principal partner under a multi-year agreement. The program is expected to launch in mid-2013.

Points International will power and manage programs designed to enhance Southwest Rapid Rewards Members' abilities to collect and share their valuable points.

Year-to-date, Points has brought on seven new partners including Wyndham, Melia Hotels, Speedway and SVM. These new partners along with new products from existing partners are expected to generate $50 million in incremental annualized revenue beginning in 2013, with Southwest accounting for the bulk of the revenue.

"Although there is no change to our $13.00 price target (due to rounding effects), the addition of Southwest is NAV accretive," RBC Capital Markets analyst Drew McReynolds wrote in a note to clients.

Meanwhile, the business has a healthy pipeline of potential new business, the reiteration of 2012 organic revenue growth guidance of 10-15 percent despite the macro uncertainty, with expectations to achieve the top-end of the range and for acceleration in organic revenue growth in 2013.

Year-to-date, the company indicated that approximately 47 percent of the revenue growth has been generated by the international footprint. While 2013 guidance will be provided either in late December or early January, the company sees revenue growth would accelerate in 2013, boosted by growth among existing partners as well as the likely addition of new partners.

"FTM EV/EBITDA multiple of 12.0x, which we believe is an attractive entry point within the context of an expected 28 percent EBITDA CAGR through 2015E, the absence of cash taxes, a debt-free balance sheet with a growing cash balance ($12MM at Q3/12), and option value with Points.com," McReynolds wrote.

Points International is the owner and operator of Points.com, which provides reward currency management providing multiple eCommerce and technology solutions to the world's top loyalty brands. Points.com also manages the largest consumer rewards management platform, allowing more than 3.5 million users to trade, track, exchange, and redeem their loyalty points, miles, and rewards.



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