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Getting slightly concerned since SVB was wiped off the market last week and now shares have fallen in Credit Suisse today and across banking. Do we think its going to impact heavily on Alpha?
Hopeful for good earnings tomorrow.
Notable that the top 23 shareholders disclosed on the investor site owned ~87% of shares in issue at 31/12 (yes, 2 of these are nominee accounts in EQI + HL, which owned 4.8% of shares on behalf of PI's). So just 13% / 5.5m shares to play with - nothing at all.
It's also worth noting that Tim Powell, the newly appointed CFO, spent 17 years as CFO of London Stock Exchange and led the $27b refinitiv acquisition. With that background I suspect we'll see a move to main market in the medium term which would allow a FTSE listing. At the current market cap we would sit at number 284 in the FTSE 350, that would really open up the share to new investors IMO.
Lots to be excited about here - will sit tight for next weeks results now.
Once ALPH reach £1bln+ valuation more funds will join in here.
The market is certainly being cautious given the share price is trading nearly 10% below where it closed on the day of their October trading update (£20.20) !
They will absolutely reinvest some of the interest income into the ABS division to accelerate growth & profit. We don't know how much but hopefully next weeks results will provide a bit more detail. One thing is for sure though, having multiple options that will deliver an ROI on the new income stream makes it substantially more valuable than a business receiving a one off cash boost and having nothing to do with it except return it to shareholders.
Look forward to getting some more clarity in a few days.
Regarding the interest rate bonus, in my notes on Alpha Group include: 'rns Jan 18: expansion plans for Alternative Banking, brought forward, financed by interest funds. Any extra funds gained, above expectations, in 23 will be used also.'
These words are the ones I've written, in understanding of the rns. (copies of which are out there.)
Believe some caution is required here. That said, if the effect of funding and expanding of the Alternative Banking operation, results in even more interest rate income. This expansion will most likely snowball. Could be very rewarding either in terms of fees and or interest rate income.
Definitely a solid long term hold.
If UK rates are forced higher by the FED raising to 6%+ levels then the benefit to ALPH could be really substantial. FWIW I think the BOE have little choice given the impact on exchange rates if they don't (importing inflation), plus the housing market has been more resilient than first thought.
In this scenario I struggle think of a better hedge than ALPH; it actively benefits from higher rates, thrives on helping clients manage against volatile FX moves (GBP - USD has moved down ~2% overnight) and also benefits from a resilient global economy. If we get a period of 2-3 years of higher than target rate inflation, high interest rates & volatile FX then ALPH could well grow into a £3-5b market cap IMO.
Keywords is an interesting comparison actually, a £2.3b market cap with £112m pre tax profit forecast in 2022. As per Liberum's Jan forecasts, ALPH is pencilled in to report £70.9m PBT in 2023, but that was based on just £24m interest income (low balled even based on Q4 average run rate). If BOE rates move higher still, I wouldn't discount us getting close to £100m in PBT, which would require ~£4.5m in monthly interest income.
With that level of FCF and a clear history of executing on growth, I don't see how this could trade under £1.5b cap / £35 a share.
Hi
Yes that would work, or you could even wait until the new tax year has started before you sell the keywords shares.
I used to be be invested in Keywords ! More than 5 bagged on that one. I reasoned out I'd got most of the juice out of it, and leave something to the next person. Each to their own; a lot of people did very well out of KWS.
hi cambridge
i plan to do this with another share where i have a lot of it in my nominee- its keywords on aim- i am thinking of selling for 20000 in the cureent tax year and use the amout to buy in isa in the new tax year- will this work? and have i missed anything?
For bed and ISA effectively you sell up to £20k worth (the shades ISA limit) and transfer the sale proceeds to a self select ISA and repurchase. If you realise a capital loss you can offset that loss against future gains from other share sales that are outside the ISA tax shelter, in order to lower you tax bill. One thing with Alpha shares is the wide buy/sell spread. To mitigate this, I won't "actually" bed and ISA where both transactions are usually enacted on the same day. What I'll do is on 6th April or soon after I will add £20k to the ISA, buy the shares, then sell the other £20k that are not tax sheltered some time later. Can be a bit of a tiny gamble if it goes against you though, but so far when I've been patient I've always made a few % doing this with Alpha.
i stll am unsure about bed and isa- i carry losses how does it work to make it profitable and how do you decide the amount
Excellent post SheerClass.
The Liberium estimate only about 20% growth in revenue from 2022. That's definitely too low I'm afraid. I'd hazard a guess at 30% growth.
This company is the best one I can see that's out there and I remain a long term holder.
I hope the share price does nothing until after 6th April so I get chance to bed and ISA another £20,000 worth.
This will double within 18 months I reckon and maybe double again with 2/3 years after that.
The interest income could easily end up being a lot higher than the Liberum forecast of £24m too. They made £9m in the last 4 months of 2022 with rates that were likely a max;
September; 1.75% (BoE didn't increase to 2.25% until 22nd September)
October 2.25%
November 2.25%
December 3%
That's an average of 2.31%, in reality they won't be getting full base rate, so maybe assume 2% which worked out at £2.25m per month to ALPH. So each 1% is worth ~£1.1m.
As rates are now 3.5% and expected to increase further at the next meeting on 3rd Feb I think we can safely assume that average rates for 2023 will be over 3%. At 3% on the same level of swept client balances ALPH would be earning £3.3m a month / £40m PA.
It's a game changer for a £760m market cap in the early stages of internationalising, especially when new operations are almost instantly profitable.
Liberum 2023 estimate is:
£120m Revenue
£71m PBT
Assuming tax at 20% that leaves a PAT of c. £56m so a PE of 14.
Alpha normal smash it out of the park and come in ahead of forecasts, so current forward PE for 2023 is probably more like 12 or 13. This is great value especially considering the rate of growth here is phenomenal. Those buying at current prices are getting an absolute bargain imo.
Managed to top up kids ISA with shares at 1829p it's screaming BARGAIN!!! Don't really care about today's price but about the future prospects. GLA.
Interesting movements here this morning, falling nearly 10% from the open for no apparent reason.
I note that EV / 2023 forecast EBITDA is now down to around 13 which compares to EQLS & AGFX who sit at ~9. At the other end of the spectrum (and IMO more relevant to ALPH) is WISE, which trades at ~27x 2023 EBITDA, some of which is client interest income.
Is ALPH finally at a level where it could be considered good value? The rating has certainly compressed a lot in the last 18-24 months and with offices in Milan, Luxembourg, Australia & Spain set to scale / open, it's surely going to continue, especially with around £30m in interest income in FY23 which can be used as growth capital...
£9mn extra dosh achieved in 4 months, which was not in the interims up to 30thJune 22, a gift to the company - what a bonus to the company!
On an annualised basis - an extra £9mn x 3 = £27mn additional interest income p.a.
They made £33.2mn PBT in yr ending 31/12/21.
This additional interest income is MASSIVE for the year ended 31/12/22!
Excellent news for Alph. No wonder they are focused on utilising funds for ABS.
Well done!
This company will multibag over the next decade
Here we go, here we go! Ole ole ole ole ole ole....
That's at least two of us.
I'm hoping Alpha will be giving my pf some Alpha.
don't worry - found it!
where can I find the latest TU? I thought it was out in 2 weeks?
Whatever the price gonna be after trading update I'm going to hold it for the long time.
£15? Lol Read the latest TU, mate. Ahead of expec - not profit warning.
No reason for it to fall so far.
Yes PER has a premium but ALPH has demonstrated year on year excellent performance (like CER) - so commands premium PER.