Alpha Group International Share Chat (ALPH)

To put some more "colour" on the premium over the 01-May closing price, i.e. the day before the offer was made, TP ICAP's closing price that day was 255.50p. Yesterday's close, with no bid, was 311.50p, a gain of ~ 22%. TP ICAP operates in a similar market place, and both share prices (but not the underlying core businesses) were adversely affected (by the general market sell-off) following the US stance on tariffs.

Applying that 22% gain to ALPH, and you get a price of c. £33.50. Measured against that price, the bid premium drops to 27% - hardly exceptional to gain full control of a company, and one which is generating substantial cash year-on-year and has zero debt. This looks an absolute steal for Corpay Inc.

Will a rival bid emerge? Potential interested parties have had plenty of time to work out what a fair price and also a maximum price might look like. Alternatively, hopefully a sufficient number of the larger institutional holders do not back the take-over at this price. For sure, the price will retrace, possibly below £30 per share, but in the long-run (five to ten years), I feel strongly that they will be rewarded for their patience.

What would be helpful is for ALPH to publish a trading update for the last half-year, which they have done in the past at this time (check RNSs). That way, shareholders will be in a much better position to judge for themselves whether a sale price of £42.50 is "fair" or is fundamentally undervaluing the company, rather than relying on the Board (who, do not forget, have their own interests to consider - e.g. positions on the main board, etc.??).

Well not quite the £43 I was hoping for at a min.

It’s good but not great imo.

Have sold a few but may sit on majority and wait and see what occurs… not sure.

Unlikely a rival bid will come in but not impossible….

It’s a bit sad as this had real potential imo to be really big for us all. However bird in hand and all that…

Am disappointed, to be honest. Not sure that it is such a "fair" value. The premiums cited reflect, in part, weakness caused by the "tariff tantrum". earlier in the year. And that presupposes that it was already "fairly" valued.

For all the reasons outlined in an earlier post (and I could add more), the likelihood of the market cap hitting £10 bn within ten-years, is not entirely without merit.

As such, I hope a rival bid is lodged. But we shall see .... Or, that it does not hit the 75% approval rate, but sadly, I have no doubt that the major shareholders have been sounded out as to what price they would accept (shame that Berkshire Hathaway do not have a sizable holding, as this company ticks so many of their investment criteria boxes).

I'll probably hold on a little while to see if there's any chance of an other bid, but it does look like it's a done deal, so likely I'll sell in the market rather than wait months for a few more pence when the deal completes.

This may be going cheap… I wonder if in spite of the board approved offer there may be another bid.

I agree Phil. I have sold mine int the market - time to move on!

Well, the day has arrived - it seems like a fair offer.

Let's be honest, if Alpha were listed on the NASDAQ, its share price would likely have been in excess of £40 even without the Corpay bid. With that in mind, I’m optimistic that we could see at least £40 per share at the very least. That would translate to a market capitalization of £1.69 billion. When you account for the company’s cash reserves, the enterprise value drops below £1.5 billion which is roughly $2 billion. To me, this doesn’t seem like an unreasonable valuation for a company experiencing such rapid growth, especially one projected to generate over £100 million in net profit this year. Corpay is after all a US company that is used to paying decent multiples for high quality growth companies.

Yes, £40 was my gut reaction when the news first broke in May. I would think Corpay would be happy to pay that given the tremendous long term growth prospects for the company. The fact they're still negotiating after 2 months suggests Tilbrook is holding out for a better deal.

So what do we think this might sell for? It was £28 when the bid news broke. Though the 6-month average would have been less. It's now £34. I would say £38 is the minimum and £45 the max. My guess would be £40-42. Tilbrook is the biggest single holder and I can see why, having quit as CEO, he'd be willing to sell. But surely only at quite a significant premium. And I reckon institutions would be happy to get £40. The fact the SP has been creeping up suggests the market thinks there's a very decent chance of a sale, though they must be expecting around £40 as there's some real downside now it's at £34.

They are clearly aiming to get a deal done before summer holidays. Get your shopping list ready for the proceeds. Long end of the rates are still very high so NTI a big consideration. Banks like HSBC or even WISE if it falls back down in the summer as rates will get cut but likely remain high.

Given the extension, this time, is just 17 days, it gives me the impression an offer is more likely. If negotiations were going nowhere then why extend. If negotiations were going somewhere slowly then why extend just 17 days. Time will tell. Good luck everyone invested here.

Whatever happens next I hope it's the last extension of the PUSU. Share price looks stable ATM, GLA.

Deadline is approaching, 5pm Monday 7th July. The US market is shut tomorrow.

I wonder whether we’ll get another extension?

I have got no idea what will happen but hoping it is good for shareholders either way.

Also known as a "boring but beautiful" phase when most people get impatient but where the best forward returns tend to come.

A lot of effort to pull out now.

We will most likely get an extension on Monday. An extension is as good as good news but it will be summer soon. 🏖️

Yep, my mistake. Should have been north of £40 of course

I only hope that if the sale comes through the share price will be north of £4. Only one more session to go.

Trading announcement is due sometime in July

What's the rumour?

A total of 9 RNS for ALPH today re activity on 2nd June, but only the first one reported by the London SE site ATM.

@jlovie, Im quite happy for the company to continue buying back shares whilst the price remains under fair value.

Interesting that the buyback continues at current price.

Hi Dang,

You are correct - I applied the p/e of 20 to the Statutory Earnings including the Treasury Income. However, there are two factors influencing Treasury Income going forward - interest rates that are likely to fall versus Client Balances that are likely to rise with growth. Arguably a p/e of higher than 20 would be justified for the core business - but I discounted this to account for the Treasury Income.

Either way, we're in the same ball park - the shares are hideously cheap - particularly with a prospective formal offer coming.

I would be careful applying a 20x to the whole business. You have got to remember that a significant portion of those earnings are associated with Net Treasury income which they explicitly report separately within their results as it largely determined on interest rates.

However back of the envelope I think you are right , a 20x (underlying profit) of £47.4m gets you too ~£1bn which is roughly equal to the current enterprise value.

You are then essentially throwing in the net treasury income for free. I could easily see this being sustainably around the £50m. If you apply a 10x to that portion then add another £500m to intrinsic value.

This brings my fair value to approx £40-45. Heavy buyer at these levels

Current sp is now up to 3060p on news of the rejected offer. The valuation of ALPH is far cheaper than the p/e of 14.5 quoted. There is £250m+ of cash holdings equating to 595p per share that arguably can be taken off the share price. Taking account of this and you get a p/e of 11.2 - so one would hope that a fair value take-out price would be considerably higher than the current market price.

ALPH has delivered an averaged CAGR of 30% so a p/e of 20+ would be a fair valuation which would be 4400p + 595p cash per share = 4995p per share.

I also think a takeover is unlikely. Alpha know their worth and Corpay would have to pay a huge premium. Does that mean the share price would fall sharply if it doesn't go ahead? I doubt it. It was £28 before the news. Now it's £31 and the FTSE 250 has been on a strong run since then. So worst case scenario would likely be a drop to, say, £27. Plus, the takeover interest shows how under-valued Alpha was (and still is in my opinion).

SP now over 3000. Looking like the markets believe a takeover could happen. Obviously a very good chance a takeover won't happen too or even a firm offer. If an offer is put forward and then rejected then SP may drop significantly. So, my question is (for anyone interested in the debate) now the P/E is at 14.5 x, is the company over valued and could this be a good exit point?

Based on share price reaction, market does not believe that takeover offer will be successful. Corpay will have to pay a huge premium for a successful bid which they may not be willing to. At the same time, I was reading that Mastercard has taken 3% stake in Corpay Cross Border payments business which could justify paying them a huge premium. Time will tell but I am in no rush to sell - bid or no bid. It is not in shareholder's interest to make offer price known as you don't want others potential bidders to know.

Is it unusual for the offer price to not be mentioned by either party?

I guess Corpay offered a ridiculously low ball for a start hence the answer. There is no mention in the RNS about the amount. Even without the offer the share price can reach 3500 - 4000 within few years IMO.

i have met alpha ceo clive kahn a couple of times at various business events, he also kindly gave me his time a few years ago to advise me on my business, and he really is wonderful and i think we are in very safe hands, every business he touches turns to gold, he has an amazing track record, he focuses on the culture of a company which in turn leads to results, i am so pleased he is the ceo, because he's one of the best in the fx payments/finance game, i think he'll reject any offer and really does have the long term growth for us investors in mind.

i agree with previous comment let's go to the moon in terms of share price, offers will come in, i wouldn't sell i reckon the share price can hit as high as £50 per share in the next 5 years.

i'm hoping an offer is rejected but they will continue to come in moving forward and helps the share price move up.

what i like about clive is that he is not full of ****, he says it as it is, if he says things are good then things are good, and vice versa ( a lot of ceos are full of crap, clive is not).

p.s. i must state that i know absolutely nothing about what is going to happen to the share price, (my views are all my own) and i'm just going by my judgement of his good character having personally met him, and the track record of alpha so far proves how influential he has been to it's success.

clive is the main reason why i invest in alpha and have the majority of my portfolio invested in alpha.

as far as i am concerned i'm investing in clive as i believe in him and i know that he succeeds, i don't even look at the financials, i know i'm in good hands.

there you go, a bit of first hand ceo character analysis for you, for what it's worth.

all is good in the world.

I’m fed up with our successful UK companies being taken out by well capitalised foreign predators. Let’s reject the offer and back our existing team to make us shedloads of cash.

I’m in a few fintechs (and sold out of Argentex before the disaster) and I think this is the best of the bunch.

Excellent market for us, shareholders. All that noise and unpredictability on a currency market is a boon for Alpha as the companies will try and hedge the value of their export/import in the future. What's more one of the competitors just capitulated (AGFX forced sale).

Pleasing to see Mr Market respond positively to this update - with underlying growth of 23% - shares are up 120p to 2370p. Whilst it's 'only' in-line with expectations for underlying profit before tax and profit margins - it's a fantastic growth rate in difficult market conditions.

It would however be extremely useful if they actually stated what those expectations are in the RNS news release. Brokers' forecasts are in the public domain so there is no constraint on stating them in the TU. For example, see 20 Jan Judges Scientific - footnote:

1. Current consensus market expectations for the year ended 31 December 2024 are Adjusted basic earnings per share of 276.8p.

But I digress, back to the TU. Thanks to the current high interest rates the interest income continues to pour in £85m up 11% on 2023. Despite the £30m in buy-backs (£10m more in-progress) 23% of the market cap is accounted for by £217m of cash.

That's a lot of cash to be sitting on. It would be great if they could find a compatible bolt on like Cobase (client numbers and revenues increased by 59% and 70% resp.) but I suspect that it'll be more buy-backs. IMHO it would be nice to get a special dividend together with a share re-investment option.

Looking across the business units - all's well and moving in the right direction and with a positive outlook statement.

So, an excellent TU I reckon.

Mcap of £1bn covered 20% by cash. In 2 years time 35% (after buybacks and dividends). Free cash flow over £90m this year, even if interest rates fall by 1% will still be generating in excess of £75m cash on an enterprise value of £750m (£600m in 2 years). They consistently grow clients year after year in the UK and have a huge growth opportunity in the smaller international markets. Hopefully that opex investment slows or they have built a solid platform for better than expected growth. Small top up today on the dip. GLA

Who knows, maybe shorting it to get more at a lower price - that’s what they’ve done to the silver price.

This is very odd. J.P Morgan building up a stake and the price falls like a stone with only very modest volume.

Excellent post Considerall. I was thinking along similar lines when they announced the appointment of the new CEO. He has an excellent track record in building companies in the payments space and I think he can repeat the trick here with Alpha. That's why Morgan Tillbrook left. He did a fantastic job to build Alpha, but the new CEO will take this further now. Tillbrook said as much in his stepping down communication.

Having too much cash is a nice problem to have.

Certainly preferable to not having enough.

I’m not sure it’s as simple as you state. The additional cash generated from the interest income is still relatively new to Alpha. If a company with a good growth track record suddenly finds itself with additional cash, should it really rush to deploy it into new investments! No, it should still hold itself to high standards in regards to deploying it wisely. It takes time to formulate ideas and test them etc. alternatively should it rush to deploy it in buy backs and dividends? I don’t think so, Alpha has a very strong history of smart capital allocation and generating longterm growth. The management team need time and shouldn’t rush. In addition, let’s not forget they are also earning interest on the interest. Alpha are a long term focused business and of course some shareholders don’t always share the same mentality.

A company cannot be well managed if it allows to grow a cash pile without finding a good use to it . The management lacks imagination . Furthermore it reduces the return on the equity which is such an important measure by all account .

So up to the new ceo to find a way to use this growing cash pile . Rebasing the dividend and a much bigger buy back is what need to be done . Second , more acquisitions like cobase would be a good thing …

At 2237p prior to the TU we've had a strong move up to 2463p as I type a 10% rise in three days. ALPH has moved out of the four month sideways channel. Mr Market appears to be responding to the return of organic growth. ALPH has characteristics that work in their favour throughout the business cycle. If we now have an environment with organic growth and high interest rates perpetuating - then ALPH should do very well.

On the £217m cash pile - they are generating £6.7m each month interest rates remain at these levels - so the out-pacing the buy-back programme.

The new CEO Clive Khan has just taken over - so we'll have to wait for him to reveal the strategy - probably along with the FY24 Results in March.

I thought it was a great TU. Highlights for me were:

1. A strong second half giving c. 20% yearly growth.

2. Increase in cash balances

3. 60% growth in overseas business

4. The comments in having only scratched the surface of the addressable market (lots of companies say this, but with ALPH it has more weight given past growth trends, as it suggests there is a long runway for these to continue).

I'll be buying more if it dips under 24 (I'd buy more now but I already have 10% of my pension in this one!)

It's amazing to think that if interest rates stay the same, and if client balances don't increase (which they will), then in about 10 years ALPH will be have generated a cash pile equal to their current market cap from non-core activities that don't even count to measure their EPS and pe ratios. How many companies can you say that about?

Yes, KH, a bit of a puzzle. From memory, I don't think that they include a large part of the interest received (on client accounts) in eps for regulatory purposes (might be wrong on this), hence why they went down the share repurchase route. Also, the quantum of interest received could be quite volatile (12-months ago, interest rates were expected to fall much quicker than they have done to date), hence why the first tranche was for £20m, which they covered in the first six months, and then extended by a further £20m.

I must say, I was rather surprised that the buy backs stopped in early December, before resuming again in the last couple of weeks. It would be interesting to know the thinking behind this (temporary) suspension - why wait until the release of a TU indicating good progress; as a result, the company will be buying back at (significantly) higher prices (if the rally holds)?!?

Going forward, I agree KH, the cash balance is unproductive. From 2002 to 2003, the final div increased from 8p per share to 11p, an increase of 37.5%. A similar percentage increase this time might be appropriate, together with a special div and extension of the buy-back scheme. Time will tell - hopefully, these questions might be addressed at the AGM?

The other thing that would be welcome is for a chunk of the shares currently held as Treasury Stock to be cancelled. Whilst these shares when used for employee share incentive schemes prevent dilution, the number held in TS at the moment is sufficiently large for these purposes.

Of course, the company may well be building cash resources to fund a (hopefully, shareholder value enhancing) acquisition, without recourse to alternative funding sources.

As I said earlier, I have full confidence in the quality of the SM team, and they certainly do seem to be working in shareholders' long term interests (and, it seems very hard to find company's, c.f. those quoted on AIM, where this is remotely on the agenda of the SM in situ).

I don't really get their policies on spare cash. 217m of cash is a lot to be sitting on for a company with 1b market cap. But they don't seem to want to do much with it. Their not acquisitive. Dividend is very low. And buybacks are modest. I think they should do it like GAW - organic growth and redistribute 'truly surplus cash'. Unlike GAW, though, the SP is criminally low, so they should also increase buybacks as long as undervalued. Best company I own (along with GAW).

Agree with all comments, very encouraging update.

This has been a very well-run company from the outset [check-out RNS Number : 2271M, 26-Apr-2024 re employee share schemes where vesting of shares is contingent on pretty demanding target growth rates. Note also that the executive did not receive a bonus last year as the (very demanding) hurdles were not passed].

The resignation of the founder and CEO, MT, created some (short-term) concerns, I think, but these results should put those concerns well and truly to bed. The new senior management team are very experienced and capable of continuing the growth narrative.

The cash generation has continued apace, and it would be a surprise not to see the share buy-back programme extended again, and very probably increased. But agree, Maddox - a special dividend, plus an enhanced ord div would be welcome.

It does seem that this company is rather "under the radar", although note the large OTC trades reported at 17:00 at a price of £24.29, well above the uncross price of £23.80.

The final div is due to be announced c. 12 March. Last year, the div increased from 11p to 12.3p a share, a 12% increase. Any % increase beyond this, plus maybe a special div, and we could see a further leg up.

At the moment, I'm happy to accumulate - in 5, 10 years time I suspect the market cap will be (meaningfully) higher than the current £1bn level.

Looks like a short lived rally and the price will drift lower to where it was few days ago. Pathetic.

Buy, buy, buy. At such low price it should be taken over. Period.

@TheT

Fantastic write up and a lot of information there to be had for existing holders and also newcomers. Much appreciated for such an in depth summary.

TBC.

4. Larger companies were very likely restricted from using ALPH's services whilst an AIM company. Now that they have a premier listing on the main board of LSE, this obstacle is removed, leading to a larger and better quality customer base, which hopefully will be reflected in growing the customer base, revenues and profit in FY 24 and onwards.

5. Appointment of Jayne-Ann Gadhia to the Board will strengthen and diversify the board. In particular, given her background, she may have been appointed to pave the way for the company to apply for a Banking License, which I think may be value enhancing?

Cons

1. Resignation of Morgan Tillbrook is (potentially) a significant loss

2. Recession accompanied by falling rates may affect growth rate, leading to pressures on valuation.

Just my thoughts. Personally, am happy to be invested here. The new team is very experienced, and by no means, "fly-by-nights". One to lock-away and look-back in five or ten years time and be pleasantly surprised.

OTB. Yes, very quiet. Perhaps under the radar, as you suggest, which perhaps is no bad thing?

On the plus side:

1. Very well managed (entrepreneurial) company

2. Insiders heavily invested (c.f. sizable recent purchases by non-exec chairman

3. Cash flow generation extremely high, growing (although may need further confirmation once Dec 2024 accounts are finalised) and consistent, to a large extent generated from client money on overnight accounts. Although rates have fallen, this may be stable for FY2024 v FY2023 assuming new accounts have been added.

Div payment in FY2023 was £6.365m, up from £4.810m in FY22, an increase of 33%. Increase in FY24 is likely to fall to a c.10% increase.

But, company started a buy-back programme wef 29 January 2024 in the sum of £20m, to end the earlier of the next AGM (01-May 2024) or when achieved. Stock bought back to be held as treasury stock, partly to used to satisfy employee share schemes, thereby negating future dilution.

By the AGM, £11.76m had been spent on 682,127 shares at an average price of £17.24. Of those shares purchased, 234,627 were used for share employee schemes, leaving 447,500 shares as treasury stock and 42,874,313 total shares (from 43,321,813 immediately before the share buy back programme.

The programme was extended for the remaining £8.24m to be spent until the earlier of the next AGM (May 2025), or when the money was spent.

This happened on 27-June 2024, with a further 324,301 shares bought back at average price of £25.41 (£8.24m/324,301).

Accordingly, £20m had now been spent in c. five months buying back 1,006,428 shares at an overall average price of £19.87, with 234,627 shares allocated to employees, leaving 771,801 shares in treasury stock and 42,550,012 shares outstanding.

The following day, 28-Jun 2024, the company announced a further £20m buy-back programme to end the earlier of the next AGM (May 2025) or once the money had been spent.

As of 02-December 2024, a further 438,289 shares have been purchased, increasing treasury stock to 1,210,090 shares and decreasing the shares outstanding to 42,111,723.

On this basis, it seems probable that the full allocation of £20m to the programme will be realised around the time of the next AGM, or shortly before.

If we (very conservatively) assume that the shares allocated to employees occurs semi-annually, a total of c.470,000 shares will be allocated at a cost of say, £20 per shares, i.e. £9.4m. With a buy back during the year of £40m + divs of c. £7m less £9.4m for employee shares, this amounts to c. £37.6m to give a yield of around 4% based on a share price of £22 and shares in issue of 42,000,000.

Given that net cash and cash equivalents increased by c. £60m during FY 2023, that leaves plenty of headway to at least continue or increase the buy back programme once the second one has run its course, and/or increase the dividend significantly.

All seems very quiet here - sp has gone a bit flat compared to recent months prior and no new commentary on here for nearly 3 months! Leading payments focussed fintech.. Has / is this one slipping under the radar?

With all the recent Director Buys and over-reaction to the CEO change, my gut feeling is that this will return to the 2500's before the end of this month.

In addition to strong director buys from the new CEO and departing CEO, the company has also materially stepped up the pace of its share buyback program over recent days - all reinforcing that the recent dip is overdone in my view.

I started my position in ALPH in 2017, only added some more during difficult times, never sold a single share.

This time is no different to me, I have strong conviction in the company and BOD. GLA.

It is now being shorted! But I doubt they have better information to make such a decision than MT!

So I may be tempted to top my holding, which I was considering prior to the recent changes, only question is are we at the bottom yet?

Mr Tillbrook is not willing to sell any shares so far. He has just bought some more for 200k. Nice.

Mentioned a couple days back I was going to average up, glad I was busy and didn’t get around to it then - topped up this afternoon. GLA

Yeah, I agree Clive Kahn looks good and I'm definitely not selling. Not sure if I want to add at this level or see if it falls back to £16 (unlikely, I would imagine). The cash in hand, buybacks, low p/e (on a statutory basis) are all reassuring and provide a decent safety margin.

As you say it’s all speculation, but seeing as the business is growing at a significant rate both in headcount and numbers, and fx/payment fintech still being relatively new space, personally I do not think that has run out of legs. Actually far from it.

Morgan not leaving for 3 months and the Clive chap to replace him is no fool - industry veteran who will hopefully talk ALPH to the point of sale.

The concern isn't just that he's left but that he's left now. Savvy leaders often leave when they feel that a project has peaked. It happened at Future and also at Scottish Mortgage a few years ago. I'm not saying Alpha is set to tank, but there is the worry that growth might be more pedestrian than in the past and that most of the journey has already been accomplished. Of course, that's all speculation. But it's a concern going forward and I'm not surprised to see the SP well down on the news.

If you look at the composition of the board you will see how deeply impressive they are with lots of finance, fintech, fast growth and listed company experience. I just bought more.

Its a blow that he's going, but down 14% seems rather excessive for what remains a fundamentally excellent company. Markets don't like uncertainty though, and Morgan was an excellent CEO.

No bad news? The founder leaving is pretty darn negative...

Openthebox, today may be the ideal time to buy, down 11% on no bad news.

Unsure of the reasons / sentiment behind recent drop in price - interim results last week seemed very positive. Contemplating averaging up while the price is under a bit of pressure.

Https://www.msn.com/en-gb/money/other/analysts-predict-this-under-the-radar-growth-stock-could-rise-by-25-within-a-year/ar-AA1qbvfu?ocid=msedgdhp&pc=U531&cvid=3cf32e3b56fa4be49ac3a719a01e0ecc&ei=22

A strong set of H1 2024 results in what remains a subdued underlying market. I didn't previously appreciate how much of their FX business was actually driven by alternative asset managers - interesting to see the new split of 'Corporate' and 'Institutional', although I'd like to see Institutional broken down further into FX, alternative banking and fund finance as I'm quite bullish on the prospects for the fund finance proposition. Does anyone know why the 'NTI-own' was only £0.7m? Seems very low for a half year given their adjusted balance sheet cash position of £180m+ but I suppose not all of this will be sitting in an interest-bearing account (some will be posted as collateral etc). Eager to see Alpha's 'natural hedge' prove itself later this year / early next as interest rates start to moderate which should see an acceleration across all core revenue lines.

I note in the RNS it says that shares will be held in Treasury. Does ALPH have a history of cancelling some of the shares they purchase? Apologies if I have missed something obvious.

Another round of buy back worth £20 mil, happy Friday news.

Apologies - should read 5th June :-)

Https://mondovisione.com/media-and-resources/news/ftse-uk-index-series-indicative-quarterly-review-changes-june-2024/

The above is a link that Alpha is officially expected to be promoted to the ftse 250 subject to final capitalisation toting on the 5th April

Houston- we have lift off - trackers and incoming broker notes ( I suspect). Initial 250 FTSE cut-off is tomorrow with notification on Tuesday.

Late buy of 2.5m shares just went through. Yes. 50m£.