Summit Ridge Capital: Don't Own Net 1 UEPS Tech 'At Any Price'

In a recent report on Instavest, Inc., Summit Ridge Capital Jay Yoon shared a look into Net 1 UEPS Technologies Inc UEPS, recommending not to own its shares, no matter the price .

According to the expert, the company has “a long history of controversy.” Over more than 17 years, it has been in the spotlight, being repetitively accused of bribery and mishandling of grant beneficiaries. Yoon, however, decided to focus on the company’s financial statements and what seemed to be anomalies in its non-trade account receivables.

NET 1 UEPS Technologies separates its non-trade receivables into two categories:

• Prepayments to South Korean agents
• Other receivables

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Over the past few years, both of these classes have seen its figures surge at an accelerated rate. Between fiscal 2011 and fiscal 2015, receivables related to prepayments to agents in South Korea more than tripled, from $16.8 million to $53.4. On the other hand, other receivables rose by 370 percent, from $9.9 million in fiscal 2010, to $46.4 million in fiscal 2015.

The growth rate and unusually large size of the firm’s non-trade receivable accounts are a source of concern for Yoon, who believes that “the peculiar nature of UEPS's non-trade receivables calls into question the quality of the Company's earnings and the integrity of the Company's financial statements.”

This, added to a few other concerns led the analyst to think that Net 1 UEPS Technologies stands as “an attractive short at the current share price level.”

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