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I agree. This has breakout written all over it. I just tried to buy a few but there's nothing available... I can sell at 18.50.
There has been no online quote for 100 shares since 8.10am, no doubt due to the 5k buy above the ask at £18.45. Peel Hunt are advertising £18.40 on the offer, but there is nothing available. The real bid is £18.32 for size, yet at 8.43 Liberum saw fit to drop the advertised bid to £18...
The last time I can remember such an imbalance in liquidity was this time last year, shares promptly broke above the then £19.40 resistance on 6th April 2023 and didn't look back until they hit £23 resistance on 11th May.
Of course, fundamentals 1 year on are dramatically stronger, with an £84m increase in net cash (worth ~£2 a share), a 5 quarter track record of treasury income, an ongoing share buyback & imminent move to a FTSE premium listing. The macro picture is also steadily improving, with inflation seemingly tamed & interest rates stable, meaning conditions for business are much improved, which is of course positive for Alpha's underlying performance.
All in all, with a >15% FCF / EV yield, Alpha is incredibly cheap, which is almost certainly why liquidity has dried up... I think £25 a share would still be cheap, given FCF / EV yield would still be over 10%
Ps. Peel have finally moved off the offer, now it's NT for 100 shares at £18.45 with Invesco blocking online dealing. We're on the verge of a proper breakout IMO.
With the AGM on the 1st May and the full FTSE listing planned for May surely we must be close to getting a timetable for the transfer from AIM to full market listing ? Then with more brokers all over the figures that’s when more international interest should perk up (as well as the trackers).
I thought it was notable that they didn't mention their North American & Asian regulatory license applications in last weeks report, which we know were started at lease a year earlier;
"Whilst we are only scratching the surface of the European market, the service providers we are partnering with are global, and have already expressed a strong desire for us to expand our offering to North America and Asia. These regions are currently outside of our regulatory scope, but with the benefit of the interest tailwind, we have taken the opportunity to begin regulatory applications in the US and Singapore. These applications are just one such example of our accelerated investment in scalability that is being carried out to secure our global expansion. Providing these applications are accepted, this will open up new revenue opportunities for the business, from existing partners who have already shown a strong appetite to work with us in these jurisdictions."
I also spotted the below Prequin research which was released on the same day as our results;
https://www.globenewswire.com/news-release/2024/03/20/2849698/0/en/North-America-is-consolidating-alternative-assets-as-region-holds-almost-two-thirds-of-global-AUM-Preqin-reports.html
And finally linking to the commentary on the main market listing;
"As a business that is growing in size, becoming more global, and gaining interest from increasingly larger clients, we believe a Main Market Premium listing will serve to further enhance our reputation and support our market penetration as we move into new countries and engage larger clients."
To me it all points to a launch into the NA market in the very near future. It wouldn't surprise me in the slightest if it coincides with the May uplisting, it would make a lot of sense & explain the ~14 month lead time from first announcement of the move to it actually happening.
Entering the worlds largest alternatives market armed as a highly profitable business armed with £200m cash would certainly be very exciting, and I agree with @Koolhead's vision for a NADSAQ / NYSE listing in the medium term, once they are firmly established in the US and revenues are substantially larger.
agreed - the days of fx brokers as such is done, unless for **** d1ck white labels as that’s mainly all they can offer via the likes of currency cloud & ebury and the like.
alpha are considered leaders within the industry, by competitors constantly wanting to replicate and know what they are doing and with exposure to corporate and institutional clients, offering mass payments amongst other services.
have just dipped my toe in off the back of these very promising results.
gla
I think viewing this as an FX company is the basic mistake. It makes more sense to view it as Fintech and it is sometimes described as such. A big part of the company's success is it's technology platform and the ASS could well drive growth going forward. Personally I'd compare it more to Wise than to, say, Argentex. But then the incredible fundamentals come into play. Wise made a PBT of 145m Vs 116m for Alpha. But Wise has a market cap of 10 billion. Wise may perhaps have better growth prospects but I also think it may face more competition going forward. But yes the combination of amazing fundamentals + huge growth prospects + interest rate hedge + great management + bargain basement price makes this by far and away the best investment I can see right now. It's 9% if my portfolio but I'm still going to add as I struggle to identify any major downside risk, all things considered.
I was reading some comments on Stockopedia's SCVR yesterday and it struck me that there is a big divide in opinion with Alpha. There are a group of investors like we have in here who think this company is outstanding and offers unbelievable value at present. However, there is a quite obviously much larger group that are completely oblivious to the fundamentals, and who still think a £750m market cap for an 'FX business' is expensive by default. I don't think any non investor has the foggiest about how the ABS business model works and particularly what is driving the treasury income...
Funnily enough, I was in the second camp until the Jan 2023 trading update flagged the interest income and I spent a lot of time looking at how the business had developed since 2017. Once you do this and realise the scale of Morgan's ambition (and how much of the hard work they have already achieved) then this becomes an incredibly exciting growth story. Now it has been 'supercharged' with incredible cashflow, it's gone to another level - particularly given the share price.
The fact is, most private investors haven't realised that the fundamentals here are second to none, once the wider market does so, then Alpha won't be trading anywhere near £18 a share. Add in that fund outflow's which have been plaguing UK small caps for the last 2 years will likely reverse when rates fall + the UK ISA + other mansion house initiatives aimed at boosting pension fund investment in 'unlisted' UK shares + the move to the 250 (and tracker funds) and I think you have the recipe for huge appreciate in value here over the coming years. It's the strongest of strong buys for me.
It's looking to finally break out of a range it's been stuck in since the start of October. Don't want to speak to soon, but could the sentiment finally be shifting again? I'm nicely loaded up now, so fingers crossed.
Cracking day! Steady move North throughout and closed on the days high, bodes well for tomorrow IMO. Extremely undervalued at the current price, lets hope this is a move back above 2000p and beyond. GL all
Great points @koolhead which I'll reply to when I have more time. There was no quote for more than 1k shares at £18 into close, so a breakout looks very likely tomorrow IMO.
Alpha Group International plc posted FY 23 results this morning. Group revenue increased 12% to £110.4m with FX Risk Management revenue up 10% to £76.3m while Alternative Banking revenue was up 18% to £33.9m. Interest on client balances grew to over £73m from £9.3m due to the higher interest rate environment. Underlying profit before tax grew 11% to £43.0m while reported Profit before tax increased 148% to £115.9m accordingly. Reported basic EPS was up 124% to 206.2p. A Final dividend of 12.3 pence per share was proposed making the total final dividend for FY23 16p. A SBB of up to £20m was also initiated in January. The balance sheet remains very strong, debt free with adjusted net cash increasing by £64m to £178.8m. Valuation remains unhelpful with forward PE at 23.6x and PS ratio at 6.55x bottom and 3rd quartile respectively. Share price also lacks positive momentum and is in its 3rd consecutive year of sideways range trading. That being said the share is low in range and moving up on today’s release, and it could generate some short-term upside even while remaining range bound. The share is also well worth knowing about for the longer run. BUY. ..
...from WealthOracle
wealthoracle.co.uk/detailed-result-full/ALPH/834
There's been a lot of focus in the chat about the treasury income and how to value Alpha. But it's worth thinking about it's growth prospects too. The land and expand strategy has great potential. As it is, London generates £35 mil of the FX revenue. With offices in several European countries, including Germany now, plus Sydney and Toronto, the hope is that these can replicate London's success - bearing in mind they still consider London in an early growth phase. They also reference using the Madrid market as a base for other Spanish-speaking markets, which could bring offices in south America into play. Longer term, there's no reason they couldn't expand into Asia, Africa, and the US. They've made a few mistakes (Toronto) but it's a learning experience and if most of these offices come good then there's probably scope for increasing revenue by 10-20x. If you think about where this company could be in 10 years time by doing little other than repeating a winning formula, it's really very exciting.
A few points:
1. It is indeed amazing that for FY2025 (hardly the distant future) net cash could equal half market cap. I wonder by when it would be 100%? End FY2028?
2. Divi increases are modest and the buyback is limited to 20m. I wonder what they'll do with the war chest. My suspicion is they're working on very ambitious expansion plans which will be announced in May with the move to the main market. Could be exciting. Personally I'd like to see them get a licence for the US (and then list on the Nasdaq with a market cap of 10 billion).
3. I'm not sure it matters how you value it. Whichever way you slice it it's a bargain. But yes it makes no sense to do a standard P/E valuation on a company that will soon have have 50% of it's market cap in cash. I also think to value the net treasury income at 3x is far too low, especially given it's a stream that should increase as it grows and in the meantime is so rapidly shrinking the market cap minus cash equation.
It's up because even a moribund UK market can't ignore cash generation like Alpha produced in H2! Shareholder equity increased by 31% in H2 alone and 56% YoY, truly stunning figures.
I note Liberum have another note out today, I find them hard to take seriously but here are some excerpts;
"We also note that by end FY25, adjusted net cash is forecast to equal c. 50% of market cap." - A truly crazy fact in it's own right...it would mean that FCF to EV yield for FY26 would be nearing 30%
"Our target price for Alpha is derived from a simple average of a target P/E multiple and a DCF for the core business plus a modest valuation (3x P/E) of the interest income. Our TP is 2675p, implying upside of 63%."
The target PE they refer to is 31x underlying FY24 EPS + 3x DFC P/E for the interest income, which comes to £178m / £4.25
Why on earth are they valuing it on an underlying PE basis when in the same report they refer to the fact that by the end of next year they could have half of yesterday's closing market cap in cash?!
A much more sensible method would surely be to pick a prudent EV/EBITDA multiple - let's say 10x and value it based on the forecast FY25 closing position.
Based on today's note, Liberum are forecasting £55m in FY25 EBITDA + £80m in treasury income. That would result in £135m EBITDA (as of today, the treasury income isn't classified as finance income, so it's not interest...), So £1350 + £335m cash = £39 a share, assuming 43m shares.
And 10x EV/EBITDA is cheap as chips for a business of Alpha's quality - note LSE listed mobile payment providers Boku & Fonix are valued at 21x and 17x EV/EBITDA respectively, and neither come close to Alpha's fundamentals or track record..
Great appointment. What a track record…..roll on the listing!
Interesting that it is up on these results. I don't see anything very different from the previous trading update. I think it's partly just relief there weren't any nasty surprises but also the imminent main market move. Short-term, I think the move holds big potential for this to re-rate to an ATH. Glad I added yesterday! This is one of those companies that merits a bit of faith.
Who knows, the penny might finally drop and the markets start seeing and understanding the story developing here. Been a big pull back and would appear to be plenty of upside from these levels.
Those results were just a joy to read. Anyone willing to hold these shares in the medium to long term is going to be handsomely rewarded.
Pleased to see other operating income rebranded to something more logical & also the uplisting date confirmed.
Results are spectacular, how this is valued at less than £1b is anyone's guess, £89m PAT £198m cash and £700m cap is outrageous. It could easily justify a £3b+ cap on a better exchange. Just extraordinarily cheap, even vs other LSE listings.
Should get results tomorrow. Wednesday has been the normal reporting day for the last 2 years.
Yes that's really useful to know and makes a lot of sense. Again this is something that wouldn't need asking if they did a CMD / investor presentation / any kind of investor interaction!
Thanks simondb. Very helpful
I asked Morgan about this at the last GM, he said that they don't have a banking a license and are therefore not allowed to give interest on balances held. He also stated that in general the money was only in the accounts for relatively short periods of time in transit to being used for whatever alternative investment it was destined for.
FWIW, I expect current falls are just due to a combo of declining market sentiment and nerves over the final results.
Personally I don't mind then reporting the interest income as they do. If it keeps the sp lower then there are three advantages: 1. I can keep on buying shares in a great company very cheaply; 2. They can reduce the float cheaply through buybacks; 3. I can look forward to higher dividends. My concern is more along the lines of the doubts Shearclass raised. Are clients not going to look for better deals elsewhere? Are they going to have to start paying back some of the interest? Could regulators get involved a bit like how investing platforms may get penalised for double dipping? Not saying any of these things are happen but I'm not sure we can count on the other interest income lasting forever, which is another reason it might be better not to recognize it. I do think they should accelerate the buyback though. They bought under 5000 yesterday.