"We see the final retiring of the Series A convertible preferred stock as a positive move by the company, which should reduce a potential risk of further dilution to shareholders. Net Element has worked hard over the last year to reduce debt and improve its balance sheet. In addition, we were pleased to see rapid subscriber growth from Digital Provider (formerly TOT Money), the subsidiary also experienced a solid increase in transaction volume processed on its mobile payments platform, which is up 86% since January 2015. We are maintaining our 12 month price target on NETE of $5.17 per share," stated Ajay Tandon, CEO of SeeThruEquity.
Additional highlights of the note are as follows:
High growth company restructuring its balance sheet
Net Element is a high growth company, which is in the midst of an ongoing restructuring of its balance sheet. As part of this process, the company recently completed the retiring of its Series A convertible preferred stock, and also raised a small round of financing through equity sales to management. We are hoping for additional clarity as to the company's plans for its balance sheet and ongoing financing when it reports 4Q15 results. Meanwhile, the company continues to grow, as indicated by recent announcements highlighting new customer wins at its PayOnline and TOT Money (now Digital Provider) subsidiaries.
Strong subscriber growth at subsidiary TOT Money
On December 1, 2015, Net Element announced that its mobile payments subsidiary, TOT Money, surpassed 3mn recurring mobile payment subscribers in October. The figure represented impressive subscriber growth during 2015, as subscribers rose by more than 170% since January 2015. TOT Money also rebranded to become OOO Digital Provider, and announced an expanded suite of mobile payment and digital content services available in the Commonwealth of Independent States (CIS) and select emerging markets.
PayOnline Chief sees opportunity from Russian Mir
Net Element's acquisition of PayOnline added $2.4mn to revenues in 3Q15, but figures to add substantially more value in the future given its growth prospects for mobile payment processing of online transactions in emerging markets. The subsidiary of Net Element has over 10mn active consumers and thousands of merchants in the Russian Federation, Europe and Asia, including a recently announced full integration of its services with Dating.com. The company also stands to benefit from the introduction of a new Russian National Payment Card System ("Mir"), according to PayOnline Chief Marat Abasaliev. Mir is being aggressively pushed by the Russian government for a 2016 rollout, and should provide opportunities for PayOnline to benefit from increased transactions and usage in the market, driving revenue.
