I'm another Stockopedia user and from the latest numbers I see that a number of my concerns have gone away;
The forward PE is now only 16.
The return on capital was -10% and is now zero - movving in the right direction.
But Greenblatt's magic formula is only a D.
There's lots of free cash flow per share, which is good.
The PEG of 0.2 looks v good.
Most attractively, there appears to be no debt and £52M in the bank!
Summary; The concerns I had have largely gone away.
I invested in this business partly because I'm a customer and have used the foreign currency credit cards for years, but the outlook seemed good in spite of some odd numbers on the balance sheet. I think its a great business and now have increasing confidence in the future for FFX.
Share price: 103p (+2%)
No. of shares: 155.4 million
Market cap: £160 million
Full Year Results
This is an "e-banking and international payments group".
Turnover is in excess of £1.1 billion - we expect big numbers from FX companies. The gross value of transactions is going to be large, with the company taking a small cut out of each deal.
The cut the company takes is very small: revenues were £15.5 million, while adjusted EBITDA fell out at £1 million for the year.
After taking into account acquisition expenses and all other costs, statutory PBT is £230k.
FairFX describes itself as a "challenger brand", offering a better user experience to individuals and to businesses than the banks and other alternatives.
It has been growing headcount, making acquisitions and building its infrastructure. The investment thesis likely rests on its ability to grow revenues while controlling its fixed costs from now on. This is what it's aiming for:
The Company is therefore optimally geared to take further advantage of top line growth by enjoying the economies of scale on payment processing that comes with higher transaction volume without significant increase in overheads.
Footnotes are extremely long and detailed, and I don't have the time to go through them in detail this morning.
I do think this is worth putting in the "interesting / do more research" category. Important-sounding developments are taking place, in particular the new permission from Mastercard to issue its own cards.
FairFX is too early in its development to have shown good returns on capital, but I'm curious to discover whether the business model might be capable of doing this in future. An initial inspection of forecast earnings for 2018 suggests that it might be.
I don't own either of these, but I might mention in passing that both Visa (US:V) and Mastercard (US:MA) look like spectacularly good companies to me. Their shares offer a simple first step to gain exposure to the ongoing growth in the payments industry worldwide.
Looks good to me... I'm not going to attach importance to the £34M of Client funds, but there looks to nearly £18 available cash.
'The net cash position of the Group at 31st December 2017 was £52.0 million, comprising £34.1 million of client funds and £17.8 million of available cash. Accordingly, the Group has sufficient cash resources to continue implementing its growth strategy.'
Does anyone have a handle on the latest state of play on forecasts? I note that before the City Forex acquisition, Cenkos had already upgraded eps to 0.4p for the year just ended, with 7.1p this year and 13.4p next. The latter two being up from 5.4 and 8.3 respectively put out in November last year. With a useful to the current year contribution from City Forex maybe another upgrade is due?
Over the period, FairFX?s share price increased by 13.2% on the back of positive trading updates and the acquisition of City Forex.
In 2017, the company?s turnover increased by 39% to ?1.1 billion. Growth benefited from the acquisition of CardOne Banking completed in August 2017. Increased scale has brought additional capabilities that can be delivered to its growing customer base. Management depth will accelerate product innovation in 2018. Scale has also brought cost savings and the opportunity to improve supplier terms. Additional cost savings opportunities were unveiled in April with the announcement that FairFX will self-issue its Mastercard branded cards.
In February, FairFX announced the acquisition of City Forex for ?6 million. City Forex services the international payments and travel currency segments, both in retail and business markets. The company had been a partner of FairFX since 2007 in the Travel Currency segment. As with previous acquisitions, the combination brings revenue and cost synergies, and confirms FairFX as the key consolidator in the space.
At 31 March, the business had a market value of ?140.6m with net cash of ?10m with consensus market forecasts placing the share price on a current year PE of 18x and a 2019 PE of 10x.
No -they should be privy too more information than any other investor. Having said that they have been invested here from the outset and their relationship with the company will be close along with their understanding of it. If they were 'inside' to anything then they are not allowed to deal in it. Supposedly.
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