Cuscal's Payments Plumbing Has Been Discovered, and Its Earliest Backers Are Cashing In

Two accretive acquisitions, steady volume growth and index inclusion have closed much of the valuation gap that first drew investors, leaving managers divided on how much compounding is still left to own.

7 Oct 2026 · 4 min read

Hidden in plain sight, until it was not

For much of its short listed life, Cuscal was the kind of business fund managers liked to describe as overlooked. By September, Forager Funds said the payments infrastructure provider had become “a case study in the market eventually noticing what was hiding in plain sight.” A strong FY26 result, inclusion in the ASX 300, growing broker coverage and two acquisitions brought new investors to the register, and the valuation gap that early backers had identified narrowed sharply.

A case study in the market eventually noticing what was hiding in plain sight.

— Forager Funds, Quarterly Report, September 2026

That shift has split the register in an unusual way. Several of the earliest supporters, including Forager and HD Capital Partners, have exited or substantially reduced their holdings on valuation, while others, including Ten Cap, Ryder Capital and Katana Asset Management, argue the earnings growth ahead still justifies owning it.

The plumbing behind Australian payments

Managers describe Cuscal as infrastructure rather than a payments brand. Smallco Investment Manager explained that Cuscal connects regional banks, mutuals and fintechs to local payments infrastructure through card issuing, acquiring and payments processing, earning a small fixed fee per transaction. Ten Cap said in October that it provides payment processing and connectivity that would be expensive and complex to replicate, and that it supports its clients rather than competing with them for retail customers. QVG Capital put the moat simply: it does not make sense for any individual customer to build the infrastructure, hold the capital and carry the compliance burden themselves.

Wilson Asset Management highlighted a feature it believes the market long misunderstood: Cuscal is exposed to transaction volumes rather than transaction values, which has kept growth steady through a tough consumer environment. Ryder made the same point, noting payment volumes are growing as consumers split transactions. QVG added that Cuscal benefits from higher interest rates because it holds client float.

Two acquisitions that changed the scale

The thesis was transformed by the December 2025 completion of the Indue acquisition, which Tamim Funds Management said management expects to deliver more than 25 per cent run-rate EPS accretion and $15 to $20 million of post-tax annual cost synergies by FY29. Investors Mutual Limited described the combined business as essentially a monopoly supplier of connection to Australia's payments rails for everyone except the big four banks. In April came Paymark, New Zealand's dominant digital payments network, which Underwood Capital said was bought for A$27 million for an asset expected to generate around $6 million of annual NPAT. Yarra Capital Management said the two deals were together at least 30 per cent EPS accretive, with scope for more.

The FY26 result showed the combined effect. Ryder reported underlying NPAT up 20 per cent to $46.2 million on 4.8 billion transactions, and said management is guiding to mid-20s percentage growth in both volumes and NPAT in FY27. Ten Cap noted organic transaction volumes rose 6 per cent alongside 20 per cent underlying profit growth, and stressed that “The investment case is continued organic growth and improving efficiency, not simply relying on the next acquisition.”

When is a compounder fully priced?

The debate now is valuation. HD Capital, which bought at IPO on around 12 times earnings, said in September that Cuscal has met or beaten guidance at every result but now trades above 20 times forward earnings, and that “while there is a clear path to continued double digit earnings growth, the value is no longer obvious.” HD retains a modest holding. Forager, which also bought at IPO, exited at around $6 a share, mostly into index buying, citing valuation discipline. Investors Mutual trimmed into strength in the June quarter.

While there is a clear path to continued double digit earnings growth, the value is no longer obvious.

— HD Capital Partners, Monthly Report, September 2026

Others see more to come. Ten Cap said in September that the market is starting to recognise how recurring Cuscal's earnings are and that the re-rating has further to run. Ryder continues to see upside supported by earnings growth, improved liquidity and broader institutional interest, and its portfolio manager said she would be comfortable owning it for the next five years even if markets shut. Katana described Cuscal in October as a standout compounder, and Yarra said a multiple of around 19 times remains attractive for a high-quality grower.

What managers are watching next

Managers will watch delivery against FY27 guidance for mid-20s growth, progress on Indue synergies toward FY29, the integration of Paymark and whether the loss-making data business Forager flagged moves toward breakeven. Ten Cap's caution that successful integration is essential, and HD's view that the obvious value has been captured, frame the central question: whether Cuscal's earnings can keep compounding fast enough to grow into its new multiple.