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solzberg in Gainers & Losers,

Total System's stock to reach $55 in near term

I remain upbeat about the shares of Total System Services, a US-based provider of electronic payment processing and related services. Recently, the company announced that it had completed acquisition of TransFirst, one of the US largest merchant solutions providers. The combined entity is now the third-largest integrated payments provider and the sixth-largest merchant acquirer in the US based on revenues. The combined businesses cater to about 0.6 mn merchant outlets in the US generating $117 bn in transaction volume.

The transaction with TransFirst strengthens Total System’s sales and distribution network with the addition of over 1,300 partners and more than 350 sales professionals, enhancing its access to high growth, strategically attractive vertical markets such as healthcare, business to business and not for profit. The acquisition will also enable the segment to generate 80% of revenues from direct business and be accretive in low double digits to adjusted EPS for the first full year post closing.

2015 was a successive year for Total System. The company’s revenues grew 13.6% y-o-y to $2.8 bn, while adjusted EPS jumped 25.5% to $2.46 beating consensus estimate of $2.34. As of Dec 31, 2015, total number of accounts on file was 732.5 mn, reflecting an 18.8% surge y-o-y. In 2015, Total System also repurchased 5.2 mn shares for $242.1 mn.

Global adoption of digital payments is currently on the rise, and this, I believe, should continue to support demand for Total System’s services going forward. On Apr 26, the company plans to report its first quarter 2016 results, and I expect to see solid beginning to the year.

Recently, shares of Total System surpassed the $50 resistance level and, in my opinion, are well positioned to continue growth, with near-term target at $55.