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Despite missing their ABS targets, they are still growing client balances at a decent pace, suggesting there are plenty of clients wanting to use the service despite earning next to no interest on their balances. This really hightlights what a great service Alpha must have built here.
It appears to me that the market either knows somehting that I don't or they are too thick to figure out that Alpha are making more money than they know what to do with. Its quite clear that Alpha have made an error in reporting interest income in the way they do.
Next week will certainly be interesting. Can they really risk maintaining the status quo with interest income given the current EV of just £500m? Guidance will be critical with the main market listing, IMO it's extremely confusing to report £115m in PBT and then tell the market that £70m of this should effectively be ignored...
I've thought about this a lot over the past few weeks and even got to the point where I have considered that maybe there is an underlying reason for their extreme prudence?
Something I've not properly understood is this; we know they earn their interest income from nightly sweeping of client cash balances into a lump sum. But why aren't clients bothered about not earning interest on their cash? Is Alpha effectively pocketing all client interest?
If this is the case then it could potentially explain why they missed their 2023 ABS bank account target by 50%...
Note that Wise returns a portion of it's interest income to customers, which potentially explains why they feel comfortable recognising the net interest income in their forecasts / expectations ... Also note that Wise has added another £1b to their market cap since Alpha started their buyback!
Of course, if Alpha had earnings calls or any investor interaction like a CMD, then things would surely be clearer, as these questions would have almost certainly been asked & answered.
Meat on the bones isn't good enough. They first announced going to the FTSE 250 March 2023 - that's an entire year. What's the hold up ? They need to double the size of the buy back as well. The shares are so cheap now is the time to buy them up - and then cancel them too - holding in treasury is no good. They still have a ton of cash for acquisitions and capital requirements. Again they need to get on with it.
Yes. Some meat on the bones regarding uplisting and bank licences will be very welcome. With inflation looking sticky, those bank licences dropping could provide a tremendous fillip to interest income.
Next week will be really interesting. You have to wonder where the share price would be if they hadn't been buying back as the selling pressure is near constant. I see Wise has risen further to £9.22, no doubt due to rates being higher for longer than expected - still hard to believe Alpha are happy to leave themselves so exposed to a low ball offer...
Share price losing momentum, and a pedestrian buyback isn't helping. Spent £5.44m since Jan 30, while accruing £10m in interest income.
Share buyback is going well, hopefully putting some solid foundations to the share price for the long term. Any indication whether they will significantly increase the dividend also? Clearly quite nominal currently, and maybe now is a good time to increase this given the strong cash position.
Really pleased to see that they've settled into a steady cadence on the buyback, with 10 consecutive trading days of 10k shares bought. If they continued this for the year they would repurchase ~2.6m shares at a cost of £44m (at current share prices). As I mentioned a few weeks back, this is a material proportion of the free float & once sellers are extinguished, this should rapidly move back higher. With interest income of ~£80m PA they can comfortably afford to continue this beyond the current £20m buyback IMO.
Changing to the SETS order book with a 250 listing will improve liquidity no end, with international buying able to purchase shares via the likes of interactive broker.
Liberum said the below on the main market move in an updated note last week;
"While the company has not given a specific date for the move to the main market from AIM (first announced in March 2023), we believe this is likely to happen before the end of 1H24. This would be on the back of the FY23 prelims in March and the publication of the FY23 annual report in April"
Do hae estimates of when these events will happen or how to minter to add- i like this share and its 's moving to footsie 250 soon
No buy back with Lion trust selling down. Wait for them to finish .....it will bounce hard because its too cheap and the buy back will start back up.
Bounced back off 'technical' resistance at £17.80, that's the 5th time since November that shares have failed at that level (not helped by market makers setting their usual false spread of course). Ultimately it just means that Alpha should be able to buy back more shares with their initial £20m allocation, so short term I'm happy for it to remain range bound, although don't expect us to get any more gifts in the £15 range...
I do find the the UK market incredibly depressing though, having spent time looking at Australia, Scandinavia & of course the US, I find it hard to believe that Alpha would be capitalised at
Suddenly volume dropped today. There are no buybacks today. Somebody has gone for long weekend.😀
I like the idea of a rolling buyback using a high percentage of the interest income. Hard to see how the share price could go anywhere but up with that in place given the level of that income and, as you say, the possibility of it growing further. One thing I like about ALPH is that on organic growth rather than buy and build (sure they bought coinbase but it hardly cost anything). As long as that's the case, it's better to buy shares than sit on cash. That said, I'm happy with current cash levels as it provides a safety cushion and the interest alone on that cash should more or less pay the dividend.
Agreed @koolhead, the valuation sub £15 was one of the craziest I've ever seen on a stock market. Pleasingly, the buyback is being conducted in a very aggressive manner - £1.6m stock already bought back in the first 7 days, reducing share capital by ~0.2% already. Given the balance sheet strength, they could very easily keep a buyback in place which utilises say 75% of daily interest income, this would buy around 13k shares a day / 3.3m per annum at £18. That alone would boost basic EPS by nearly 10%... Of course, if average cash balances continue to grow and rates remain in the 3-4% region then their buying power could increase further still. Such a fascinating situation moving forward.
I got mine at £16 too :)
I expect we will be told when we are going to the main FTSE 250 by the time of the officials results release in March.
@Shearclass. Certainly in the short term we totally nailed this one. The entry point at £15 was just too good to be true and anyone buying then (I got my timing slightly wrong, getting in at an average of around £16) is already up nearly 20%. Nice to have a board with only sensible constructive posts.
Another 30k shares bought back yesterday - if you scroll to the bottom of the RNS it breaks down that total into the individual trades with time stamps, which is nice info to have. It confirms to me that they are picking up shares when there isn't a buyer for a sell. In pre buyback times the 25k shares they bought at 9.08am would have very likely caused the share price to fall back, particularly if the falling price had generated more selling. Not so now.
Shares have now reached the first resistance point, in line with 5 month highs, can they break through and extend the 7 day rise?
Excellent week here, and I agree with your targets @koolhead, this is still a bargain entry point with the 200 DMA at £19.50. From watching the book I suspect we've had a new II buying in the market which has removed the need for Alpha to take the other side of any forced sells. In the meantime, Alpha should have generated another £1.5m in interest income, meaning they've paid for the shares bought back nearly 5 times over!
I agree, Golfnut. Anywhere under 18 is still an amazing bargain. Incredible that one of the best companies in the entire UK stock market got so absurdly cheap. To contextualise, my top 6 individual stock holdings are Alpha, Bloomsbury, Computacentre, Games Workshop, Legal and Gen (mainly for the divi) and Next Fifteen Group. They're all great companies but none of the others are trading at an absurdly cheap valuation (though Next 15 was a few months ago, at which point I loaded up as I am doing now on Alpha). This really has been one of those moments when the downside risk was practically zero and the upside huge. I can see these getting to £50 in the next 3-4 years and around £100 by 2030. For me, this company has it all.
Its absolute madness that the market gave us the opportunity to load up here under £15. Alpha will be trading over £17 by the end of today so last chance for those wanting to get in or add under £17. Anyone lucky enough to have read all the excellent analysis on here over the last few weeks will realise these are still bargain basement prices. Fill your boots ! Similarly, anyone visiting these pages in the months and years ahead will see what a fantastic opportunity we were all lucky enough and wise enough to take advantage of
Just purchased another £5,000 with a minute to spare. More buying to come...
I make it that the maximum price the company could have paid for shares in the buyback was £16.18 on Monday& Tuesday and £16.30 today. Admittedly my maths is a bit dodgy.
On reasoning, they went into quite a bit of detail on capital allocation in the half year report;
"Alongside allocating capital to grow the business, the Group intends to continue with its progressive dividend policy. When taking all of the above into consideration, we believe the Group's current cash position creates significant return-enhancing opportunities. We will of course review our cash position on a regular basis, and if we feel it becomes excessive, will look to adjust."
Given the Q4 ACB of £2.1b at a blended rate of 3.8% would have generated £20m in it's own right, I suspect it's simply genuinely excess cash + the share price had / has become disconnected from reality. It also doesn't make any sense to let your share price become depressed when you have the means to decisively intervene.
I was also thinking about why they did the buy back. The obvious reason is that they have lots of cash and the shares are cheap. But they may also have been worrying about entry to the FTSE 250. Market cap had fallen to 650m. It would need to be around 500m at least to make the FTSE 250. Further SP declines could have put that in jeopardy, which would have been very embarrassing. I wouldn't be surprised if that was the main reason, as generally I think they're more focused on growth than returning cash to shareholders.
Thanks for these calculations ShearClass. Interesting to look at volume too in this context. A few days ago a lot of shares were changing hands. Today volume has been tiny. Yesterday they bought back 20k. The buy earlier of 10k, which dwarfs all other trades, could well be a buyback. And the price immediately jumped 20p or so. If this pattern repeats only one way the SP will go.