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Financial modelling is notoriously difficult but I have completed a DCF on a number of scenarios to determine what a fair value on the Alpha share price should be.
As we are all aware, the current high interest environment means ALPHA will make in excess of £70m in free cash flow this year. In all scenarios I have used a very conservative discount rate of 10% and terminal rate of 1%. Based on an initial FCF of £70m. Here are the results:
Growth rate (years 1-10) of 5%. Fair Value = £24.39
Growth rate (years 1-10) of 10%. Fair Value = £34.83
Growth rate (years 1-10) of 15%. Fair Value = £49.86
If you go ultra conservative by assuming an initial free cash flow of £50m to reflect the slim possibility of interest rates returning back to less than 1% in the next 12-18 months. Even then, if you use a modest growth rate of 10%, I'm still getting a fair value of £24.88 per share.
However you wish to dice it, using DCF, at £16.60, Alpha shares are very undervalued.
I have added to my position today
Shearclass - you always seem to very much switched on analysis - do you a view on the slide in share price ?
Updated institutional holdings in the stock to 30/9 now out with institutions holding about 86 % of stock and State Street a new institutional investor. Are you guys still holding this stock or is just me left in with this ever falling stock ?
A poster on Advfn has highlighted that the inter-bank rate hasn’t really moved much since the last quarter - probably explaining the reason for the identical interest rate %.
Q3 - just come out. They are identical to Q2 ??. How can that be when interest rates have gone up over the quarter and surely the client balance must have changed??
We should be getting Q3 interest income figures very shortly but they are not as yet giving notice of these. Last time’s were on the 14th day after the quarter.
They'll not want to move to SETS until market conditions improve IMO. With £20 now broken & a H&S pattern developing I think £17 support is in play over the coming weeks.
Can’t see why it’s taking so long moving from AIM to premium listing. Brendon plc also made an initial premium listing announcement in March 2023 exactly like Alpha. By June 2023 - just 2.5 months later they were trading on the main premium market.
There we go. That has the look of an RNS prompted by shareholder queries.
Of greater interest to me: the progress of the licence applications.
Q3 interest income is around the corner. 4% on a £2.3b balance would be just super, thank you so much.
Alpha Group International plc posted unaudited Interims for the HY ended 30th June this morning. Group revenue increased by 20% to £55m, underlying profit before tax was up 9% to £19.6m and on a statutory basis increased 194% to £52.4m. Basic earnings per share was up 163% to 87.8p. The balance sheet remains strong with adjusted net cash increasing 25% in six months to over £142m. Valuation remains something of a headwind with forward PE ratio a 26.1x bottom quartile for the IB&IS sector, the share price also lacks momentum and continues to drift sideways in a 2-year range. The business is solid, profitable and has longer run growth potential, but ALPH remains a share to monitor for the time being. ..
...from WealthOracle
wealthoracle.co.uk/detailed-result-full/ALPH/793
Can’t see anything in the interim report today re listing on the main market today as we were promised in March 2023? That is disappointing.
This RNS took me by surprise although I really like the look of this new acquisition. Cobase looks like a fantastic little business that has built a really innovative software banking solution. The 50% client growth in the last 12 months suggests demand is certainly there for the product. With 100+ corporates using the Cobase banking software I would imagine Alphas slick sales team should be able to convert a big chunk of them into buying services from Alpha which will make the £8m (plus earn out) acquisition cost an absolute bargain.
If Morgan Tillbrook thinks buying Cobase is a good move then I suspect he will most likely be proved right like most of his decisions. Exciting times !
Check out the Cobase website. There is a lovely video explainer of their software solution https://www.cobase.com
The company are presenting the interest income as a bonus short term revenue stream, until that narrative changes it's highly unlikely the market is going to give them full credit for it. As I said last month, emulating Wise and treating it as underlying revenue split into two streams with one EPS number would be far more logical than what they are doing, but it is what it is.
I also wonder whether they want to keep the share rangebound until the exiting II's have completed their business.
Berenberg are the market maker who continues to block any move beyond £23, as soon as buys came in at £23.20 a couple of weeks ago they dropped the bid & offer which shut demand down. This has happened multiple times this year. Berenberg entered the major shareholders register last quarter with a 1.05% stake (~400k shares). I think what they do is sell a portion on an attempted breakout and then buy them back + more when PI's exit at the bottom of each trough.
This suits the buying II's as they can continue to buy at
The share price of this company is going to look pretty silly soon because regardless of how this company wants to be measured on EPS the statutory EPS must include interest income. So the statutory EPS this year will be £2 + and next year £3+. The share price anomaly will then stock out like a sore thumb to everyone. Patience is the key here . 1st flag will show when the interim accounts are produced in circa 3 weeks when the statutory EPS for the interims is £1+. Add in the expected update of the main market listing and we could have significant share price .movement.
The share price of this company is going to look pretty silly soon because regardless of how this company wants to be measured on EPS the statutory EPS must include earnings income. So the statutory EPS this year will be £2 + and next year £3+. The share price anomaly will then stock out like a sore thumb to everyone. Patience is the key here . 1st flag will show when the interim accounts are produced in circa 3 weeks when the statutory EPS for the interims is £1+. Add in the expected update of the main market listing and we could have significant share price .movement.
5% interest rat to be the new norm for a long time, alpha will be racking the money in.
In the news "Its message today is that interest rates above 5% are the new normal (as they were before the financial crisis of 2008) and Britain should again get used to that."
Some very large buys going through this morn, do they know something we dont?
Up to date latest economists Uk interest rates forecasts--Economists are now expecting UK interest rates to remain around 5.50% to 5.75% for most of 2024 before starting to fall at the end of the year. UK Interest Rates are expected to fall by around 0.75% to 5% by mid-2025 and even further into 2026 where they are forecast to settle at around 4.5%.
This trading update did mention the fund fin solutions business section by stating--Their cash and liquidity situation remained solid, with adjusted net cash inflating 26% within six months, surpassing £142 million. Recently, Alpha introduced a new fund finance offering, which has already begun generating revenue.
Thanks, i know about that RNS from May, though first time i spotted the service now being advertised on their website. Overall alpha will grow revs consistently and exponentially, perhaps 20-22% steady yearly and still make money in good or bad years, It is the amount of cash alpha will make that will be significant. even though it is assumed and prob correct interest rates cant stay at 5% for ever, the new long term norm will be over 3%. and whether alpha list it on their net income or not, it is still there and will be used for high EPS for shareholders, much higher EPS than today.
the amount of free cash alpha will have can also be used to allow them to enter new markets, as they have said that they can use some of that cash to accelerate the business into new areas.
Might be the first promotional material on it, but they released an RNS on it a few months ago...
https://polaris.brighterir.com/public/alpha_group/news/rns/story/ryeo13w
Is this new, or is it just me? is this the first time fund financing is on the company website, i have not not seen it before until today. prob just me lol.
https://www.alphagroup.com/institutional/fund-finance/
I use yahoo finance for all my stocks research, they have updated alpha today, 1st time in over a year, new EPS rates, net profits, growth rates etc and it has a new price target of £27. 17.
Golfnut, you have explained it well, can i add, as we are 30% held by insiders, 60% by instiutes and venture capital funds and only 5% retail. as was pointed out we arent on ftse trackers, or any international funds , we are bound and restricted by those that buy AIM stocks, and many of these are now at max allocation of what they will own of alpha. If we still had a huge retail % followers, , they would certainly bid this price up when they seen the earnings. I am sure other funds would if we could get into ftse 250 or international funds etc. My point is will be be held around this share price until these funds get access to alpha when we move to the ftse250. and will money be better use into more better known stocks, who have access to more institutes, then buy back in when alpha moves to ftse 250, this is a dilemma i have.
I once a chat to another poster on another stock chat room, who said he had given up with UK stocks and prefer US stocks, cos that is where the volume is and that is where investors give higher values to stocks. Indeed didnt we read about certain UK stocks in the news that only wanted to list in the US as they said a premium valuation is always given by the US market.
One of my pet hates is fund manager cathie wood, she pumps all loss making stocks saying they will repeat the same formula that loss making stocks did in the 13 yrs old bull market form 2009 to 2022, what she went wrong is interest rates were put at 0.5% due to the banking crisis, The norm now for years to come is 3.5% steady rates, loss making stocks cannot raise capital and will dilute. that is why only profitable companies will survive and grow over the next 10 yrs imo, such as alpha. remember we are already up 700% since ipo. History shows 100 bagger stocks had a starting ave sales of $140 million a year then went on to be 100 baggers stocks.