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Finncap note today that FNX have foregone any transactions fee for Ukraine, whilst their platform costs are covered, which is fair enough.
They reiterate their 230p target price, and note:
"Foregoing any transactions fee, Fonix merely covers platform costs, with no difference to financial performance – but the professional reputation of the platform as being the best available, with the capacity to cope with such volumes of donations in a restricted time window, highlights the quality of the tech, and the feel-good factor of techfor-good in an increasingly ESG focused environment. Target 230p reiterated."
News - FNX were the carrier for mobile donations to the Ukraine appeal, with over £6.8m raised so far. Not only a terrific cause, but presumably a nice little earner for FNX too, as well as being a rather prestigious win:
Https://uk.advfn.com/stock-market/london/fonix-mobile-FNX/share-news/Fonix-Mobile-PLC-Text-to-donate-raises-over-GBP6-8/88015538
Cheers. A good pitch - learned a couple of things myself. FNX were well received by all the fund managers, and it was enough to get the guy from Stellar Asset Management to put a call in to FNX to find out more.
Simon Cooper pitches Fonix Mobile (FNX) to leading fund managers, Andy Brough, Judith MacKenzie and Stephen English at 46m50s in the latest PIWORLD Sell It To The city.
Watch the video here: https://www.piworld.co.uk/education-videos/sell-it-to-the-city-april-2022/
Or listen to the podcast here: https://piworld.podbean.com/e/sell-it-to-the-city-april-2022/
FNX were tipped as a Buy in Momentum Investor as follows in their April issue - since the new issue is now out it should be OK to copy this:
"Fonix, the UK provider of mobile payments and messaging services, announced strong first half results. Total payments volumes (TPV) grew 12% to £138m with record levels of business in November and December. Gross profit as a percentage of TPV increased from 4.7% to 5.1% as it moved away from relatively low margin TPV from voice services. Gross profit increased 20% to £7m driven by 18% growth from mobile payments and 43% growth from mobile messaging. Good cost control meant EBITDA increasing 20% to £5.5m.
Fonix has continued investing in its platform to expand internationally including better functionality for multi-currency reporting and automatic direct-to-consumer refunds, which can fuel expansion into transport and ticketing.
FinnCap forecasts EPS of 7.9p this year ending June and 8.8p in FY'23, dropping the prospective P/E to 19.7 and 17.7. Its price target is 230p, implying 20x FY'23 EV/EBITDA. I am a buyer."
I came across Paul Scott's (of Stockopedia) review of FNX's recent interims. I very often disagree with him, which is fine, but on this occasion can wholly concur with his verdict that FNX looks great!
Https://beforeitsnews.com/financial-markets/2022/03/small-cap-value-report-mon-14-mar-2022-more-cbox-fnx-3513749.html
Extracts:
"Fonix Mobile (LON:FNX) – excellent interim results, with simple, clean numbers, that I can’t find any fault in. This looks a decent GARP share, so gets a thumbs up from me. Cash generative, paying decent divis, and growing nicely, with a solid outlook. Also has very sticky, repeating business from established clients. There’s lots to like here, as a long-term hold."
"My opinion – what a smashing set of numbers, I’ve enjoyed reviewing this, so thank you to the readers who gave me a prompt to look at it.
I’d classify this as a GARP share (growth at reasonable price).
The talk about international growth is encouraging too, giving much larger total addressable market size.
Overall, Fonix gets a thumbs up from me, delivering decent interims, with a solid outlook, and at a price that I think can be justified."
Continued.....
"Scaleable platform
From the early days the system has also operated through Amazon Web Services (AWS) and its elastic Cloud. This enables Fonix to auto-scale (automatically request additional servers) to meet required computing power times. These days the system can process 2,000 payment transactions per second allowing it to support traffic spikes and situational peaks. This core capability of Fonix’s platform has differentiated Fonix from competitors’ systems with less capable technology, and enabled Fonix to win new clients. In order to ensure Fonix can continue to process transactions for its clients in close to all scenarios, Fonix’s platform works to reduce all single points of failure, multi-site deployments, and multiple divergent routes to all telecom carriers where available. Given the highly sensitive nature of the data and payments that Fonix is processing, Fonix also conducts its own security testing on top of thorough testing of its network by clients, and it operates with 24/7 monitoring and bespoke safety measures."
"Overseas expansion
But in the short run, the big fish to fry is expansion into Europe; Austria, which is one third of the size of the UK market, will soon go live and act as a bridgehead into Germany and Weisz has three or four other countries in his sights. As he says, expansion is being carried out in a low risk way by targeting countries where existing customers already operate or where there is a well developed phonepaid framework. Instead of setting up direct tier one connectivity, he is also partnering with wholesale aggregators, which will make it quicker to enter the market.
Brokers are yet to factor into forecasts the expansion into new verticals and geographies but even despite that, the business is trading strongly. Last month, Finncap upgraded forecasts to £9.6m pretax profit / 7.9p eps for the year to end June lifting to £10.6m/8.8p next year. I am a buyer."
The new issue of SCSW is now out. In last month's issue FNX was a new main tip, so it should now be OK to copy some interesting parts of their (very long) coverage (not including the parts where they simply explain what FNX does etc):
Https://www.scsw.co.uk/article.php?id=9305
"Only 35 employees
This year the business is set to report a £9.1m pretax profit on sales of £51.4m - despite only having a headcount of 35. Astonishing. Chief executive Rob Weisz says it is all about leveraging a proprietary cloud based platform - as I describe below, most customers set up their campaigns and do most of the things themselves with little intervention from Fonix."
"Never lost a client
Apart from its low headcount, what also makes this a strong business is that Fonix has never lost a customer - so each new win tends to become a permanent addition to revenues. There are presently 120 clients, up from 99 a year ago across a range of sectors including media, charity, gaming, telecoms and dating and includes Bauer Media, the BBC, BT and ITV.
When it floated in October 2020, the company certainly had no reason for new money as all its growth had been organically funded; instead, the main reason was for the improved creditworthiness in the eyes of customers - by then it was handling £150m-£200m a year cash and needed to provide comfort to the likes of the BBC that it wouldn’t disappear into a puff of smoke. The second reason was that it provided a partial exit (£45m) on behalf of selling shareholders. Even now, the tidal wave of cashflow leaves net cash of £5m and there is plenty of largesse for shareholders as Weisz has a target 75% payout ratio of earnings and is on track for increasing the dividend from 5.2p to 6p for this year."
"High element of repeat income
The great thing is that the business now has a high element of repeat and recurring income. Instead of selling on an upfront licence basis, pricing is “pay-as-you-go” based on transactions."
New presentation here - worth watching:
Https://www.youtube.com/watch?v=1ihSVLc3WXE
And FNX presented last week alongside BT, EE, FirstGroup etc at a Transport and Parking "charge to bill" event - some useful insights here:
Https://blog.fonix.com/top-5-takeaways-from-the-bt-ee-transport-event-d508a85190fd
News from FNX - they will be running this year's Stand Up To Cancer campaign, and they're introducing £40 donations for the first time:
Https://blog.fonix.com/fonix-the-cherry-on-top-for-bake-off-b1f78f1f319c
"Mar 16
·Fonix: The cherry on top for Bake Off"
"SMS donations will be at the forefront of this year’s Stand Up To Cancer campaign. Donors will be able to send a text message to donate either £10, £20, £30 and they will also be running £40 for the very first time. The donation will be charged to their mobile phone bills.
Fonix has identified the trend for higher donation price points leading to a larger volume, and subsequent larger value, of Gift Aid declarations. Since the hugely successful introduction by Fonix of the £20 price point in 2016, the £30 price point in 2018 and more recently the £40 price point the extra 25% makes a big difference. By calling out to £40 donors that their Gift Aid declaration can add £10 to their donation at no extra cost to them, Fonix has seen upwards of 70% of £40 donations covered by a Gift Aid declaration."
Https://masterinvestor.co.uk/equities/taking-a-small-cap-look-at-hsp-rcn-epwn-and-fnx/?mc_cid=a22b015b6d&mc_eid=db9f9bbaf2
"Fonix Mobile (LON:FNX) – further advance expected after strong interims and a cracking 99% ARR
On Tuesday morning this group, which provides mobile payments and messaging services for clients across media, telecoms, entertainment, enterprise and commerce, issued its interim results for the six months to end December 2021.
They showed a 16.2% increase in revenues to £28.6m, a 20.3% advance in adjusted pre-tax profits at £5.2m, helping to push up its half-time earnings by 21.4% to 4.4p per share.
All sections of the group’s business saw increases in the six months.
Its clients list includes blue-chips, such as BT, Comic Relief, ITV, Global Media, Children in Need and Bauer Media amongst hundreds of others.
When consumers make payments, they are charged to their mobile phone bill. This service can be used for ticketing, content, cash deposits and donations.
It also offers messaging solutions, in fact, last November and December saw record levels of business, with some 84m SMS messages being processed in a single month.
The group’s broker, finnCap, considers this business to be highly scalable and is expecting a good second half to round off the year to end June.
Analysts Andrew Darley and Michael Hill estimate £53m (£47.7m) revenues, profits of £9.6m (£8.3m), earnings of 7.9p (6.9p) and a dividend of 6.0p (5.2p) per share.
For the coming year they foresee £58.4m sales, £10.6m profits, 8.8p earnings and a 6.6p dividend per share.
I really like the generation of this group and consider that its shares, now at 153.5p, have great upside potential.
They peaked last year at 190p and could easily be up there again soon."
Here's Simon Thompson's tip - part 2
"House broker FinnCap is maintaining its annual revenue and gross profit estimates of £53mn and £13mn based on 11 and 15 percent growth, respectively. On this basis,expect annual pre-tax profit of £9.6mn and earnings per share (EPS) of 7.9p to support a 15 per cent hike to 6p in the dividend per share paid from free cash flow of 7.5p ashare.
However, FinnCap views its estimates as conservative as the directors say that the underlying run-rate is robust, so much so that the second half will only be slightly weaker than the seasonally strong first half(gross profit of £7mn). An earnings beat is highly likely, while the ongoing outperformance looks set to continue into the 2022/23 financial year, a factor not embedded in a 12-month forward price/earnings (PE) ratio of 17.5.
Fonix’s 5 per cent plus free cash flow yield,4.3 per cent prospective dividend yield for the 22/23 financial year, and strong organic growth prospects, offer defensive qualities,too. This explains why the shares have edged up since my last buy call (‘Profitingfrom the mobile payment boom’, 23from the mobile payment boom’, 23 September 2021), and produced a 15 percent total return since I initiated coverage (Alpha Research: Bargain opportunity to play the mobile payments boom’,5 August 2021) during which time the FTSEAim All-Share Total Return index has shed 20 per cent of its value. I see material upside to my 190p target. Buy"
Here's Simon Thompson's IC tip for the record part 1:
"Tapping into a fast-growing mobile payment play
Business is booming for a mobile payments service that enables merchants to charge customers' mobile phone bills for products or services
March 14, 2022
By Simon Thompson
Interim pre-tax profit up 20 per centto £5.5mn on 16 per cent higher revenue of £28.6mn
Record trading in November and December 2021
Early traction from partnership with Ventro
Scaling up more profitable verticals drives gross profit margin higher
12 new customers added to client base in first half
Fonix Mobile’s (FNX:154p) main business is a mobile payments service that enables merchants to charge customers' mobile phone bills for products or services. Effectively,carrier billing turns the mobile device into a cash register while offering convenience for consumers.
The latest half-year results highlight that Fonix’s payment platform is not only highly scalable (it can process up to 2,000 transactions per second), but is an important customer acquisition tool for clients. By offering an alternative payment method to consumers who may otherwise forgo purchasing, Fonix’s payment platform differentiates itself from traditional payment methods, such as credit cards or ApplePay.
For example, the group’s new partnership with Venntro, a company that operates 2,500 white labelled dating sites,has driven an eye-catching 28 per cent increase in new same-day subscribers (users that upgrade on the day they join a dating site) within the first few weeks of launching carrier billing.
The payment platform is also proving attractive to corporate clients – 12 new customers were added in the latest six-month period – seeking an alternative to traditional cash transactions which have a high cash processing cost. Moreover, by focusing on more profitable verticals such as payments for car parking, cinema tickets,pay-and-go gyms, gaming and even public transport, the group is driving its own profitability higher, too. Fonix’s gross profit increased from 4.7 to 5.1 per cent as a proportion of total transaction value (up from £123mn to £138mn), thus driving gross profit 20 per cent higher to a record £7mn.
Fonix’s payment solutions are proving popular with charities, too. For example,the group’s market-leading 'text to donate'and 'click to donate' products formed a central part of ITV’s Soccer Aid Campaign,and The Ruth Straus Foundation at last summer’s Lord’s Test match between England and India. The £10bn charity donation market is still a greenfield opportunity for Fonix, as is client-led international expansion into neighbouring western European markets. A near 100 percent customer retention rate highlights high levels of client satisfaction."
Excellent new article from the Private Punter.
Great to hear FNX have already done a couple of successful deals in the multibillion pound transport ticketing sector.
Interesting to see confirmation that Austria is taking its time, but they've got a couple of other European deals in the pipeline.
I very much like management's attitude of underpromising and overdelivering. FNX have this in common with the other successful recent IPOs that I hold in CLX and ADF.
Here's a direct link - I can easily see FNX being a bagger or three over time:
Https://martinflitton1.wixsite.com/privatepunter/post/fonix-sending-the-right-message-15-03-22
Apparently Simon Thompson in the IC has tipped FNX overnight - he sees material upside to his target price of 190p.
It looks like the tip has done the trick in clearing an overhang given the tick up just now.
Finncap's 230p valuation is a reasonable target and certainly reflects Simon Thompson's "material upside".
Finncap have retained their 230p valuation and prior forecasts, but note that those forecasts are conservative. Here's their summary:
"In our unchanged forecasts, we conservatively include Fonix’s investment into new verticals and geographies, but do not include any impact on its gross profit from expanding into these areas. Combined with today’s outlook that H1 22 is likely to be slightly larger than H2 22, our gross profit split of £7.0m in H1 v £6.0m in H2 highlights that our forecasts are likely to be conservative.
The interim DPS of 2.0p is amply covered by £4.8m of underlying EFCF in H1, and we reiterate our target price of 230p based on 20x FY23 EV/EBITDA.
At 149p, Fonix is trading on 12-month forward multiples of 13x EV/EBITDA, 5% EFCF yield, and 4% dividend yield, and we look forward to further updates through H2 22.
- Fonix’s robust investment case –
As we explain in depth in our 23 September report, Fonix is focused upon leveraging its highly scalable, cloud-based platform to expand with existing clients and win new clients as mobile commerce and mobile payments continue to scale. The structural strength of its platform is demonstrated by it experiencing no churn from major customers in six years, and it is diligently expanding its market-leading technology outside of the UK when it is led by its existing clients.
The successful execution of its strategy has driven Total Payment Volume (TPV) to £233m in FY21 from £125m in FY18, adjusted EBITDA to £8.8m in FY21 from £3.3m in FY18, and underlying EFCF to £7.3m in FY21, as management explained in more depth at the FY21 results.
We conservatively forecast adjusted EBITDA growth of +15% and +10% in FY22 and FY23, and we expect that any upside to our forecasts will be returned to shareholders through Fonix’s dividend payout ratio of 75% of adjusted EPS."
Excellent H1 results as flagged in the "ahead of expectations" trading statement.
FNX continues to look cheap:
- on track to meet and perhaps beat expectations of 7.9p EPS with 4.4p EPS in H1
- current year P/E at 148.5p of 18.8 based on 7.9p EPS to 30th June
- will soon be on a P/E of 16.9 to 30th June'23 based on 8.8p EPS
- £6.3m cash pile, with £7.2m expected at 30th June
- 6p dividend is a 4% dividend yield
- Finncap have a 230p valuation
The outlook is very bullish - "the business is showing strong momentum going into the second half of the year".
And "Record levels of business were achieved in November and December".
Good to see FNX achieving these numbers despite an evident step up in investment for the future.
And this is all domestic growth - imagine what can be achieved from the international expansion, which won't be short-term but where the groundwork is being laid.
https://twitter.com/surprised_trade/status/1503269058300592130
excellent results hitting recently upgraded expectations-99% of income of a repeating nature , we do not foresee any risk of the business being directly impacted either now or in the future bu Ukraine conflict, divi 2p
https://*********************/newsfeed/article/fonix-mobile-plc-interim-results-1371196
FNX are a main buy recommendation in the SCSW this weekend, which should help with any rise tomorrow.
Looking forward to the results myself, but as you say it’s the outlook that matters in these markets.
Looking forward to Monday - FNX's results and especially the outlook should read extremely well after the "ahead of expectations" trading update.
'The Board intends to report its interim results for the period ending 31 December 2021 on Monday 14 March 2022'
Last year FNX went ex-div 10 days after the interims were released.
Someone's just bought 7,427 shares at 146.99, way above the 144p offer price. Very keen.
Good timing surprised. Up another 8p already today, but still incredibly cheap for its sector, especially against the likes of BGO and BOKU (these are sector comparators even if not direct competitors) which are on stratospheric multiples by comparison.
could not resist, added a few more at 1.25p ...
- current year P/E at 124p of 15.7 based on 7.9p EPS to 30th June
- will soon be on a P/E of 14.1 to 30th June'22 based on 8.8p EPS
- £7.2m and rising cash pile expected at 30th June
- 6p dividend is a 4.8% dividend yield
- Finncap have a 230p valuation