Hits: 29

23 July 2020

Equals Group – Trading Update

Share Price 29p

Mkt Cap £52m

Conflict Disclosure: No Holding

  • Update Revenues were up modestly over the 6 months to £13.7m. B2B revenues up 30% while travel money declined 59%. International payments saw the strongest growth of 71% which was £8.2m of revenue. Corporate expense revenues fell 40%. The reshaping of the group will result in 15%-20% net headcount reduction resulting in a £2.5m annualised cost saving. Overall trading is returning to more normalised levels.
  • Estimates Forecasts are suspended but last year the company delivered an adjusted EBITDA of £9.1m and a loss after tax of £5.4m. Some of the adjustments were unusual.  
  • Valuation 1.7X 2019 revenue. Alfa FX trades at 8.8X and Argentex 7.5X
  • Conclusion This looks like a typical growth wobble. A refocussed business on International Payments and B2B with cost savings could deliver material upside. Interims are due in September when there could be further cost savings to come. This has the hallmarks of a turning point.

29 June 2020

Equals Group – FY Results

Share Price 34p

Mkt Cap £60m

Conflict Disclosure: No Holding

  • Results These are December year end results. Revenues +18.6% to £30.9m made up of 81% growth in B2B and -1% in B2C. B2B now accounts for 56% of the revenue. Adjusted EBITDA was up 21% to £9.1m while the reported loss after tax was £5.4m.  There is a goodwill write down but the company has also stripped out IFRS 16 depreciation from its adjusted EBITDA. Cash at June 2020 was £7.7m and revenues in 2020 are tracking in line with prior year since December. Outlook looks forward with confidence. The company uses wirecard as one of its 3 options for the B2C activities. The company says revenues have increased from the COVID lows in April.
  • Estimates Revenue and EBITDA looks like a c 5% miss for last year. Going forward the 40% growth in EBITDA pre COVID may be optimistic.
  • Valuation The EV is £52m which equated to 5.7X adjusted EBITDA.
  • Conclusion Cheap but the company has been moving fast and hitting speed bumps. With a large number of acquisitions the risks are high. Argentex of Alpha Fx may be lower risk.

21 April 2020

Equals Group – Trading Update

Share Price 29p

Mkt Cap £52m

Conflict Disclosure: No Holding


  • Update Q1 revenues up 32% to £8.3m.  B2B accounted for 67% (Q1 19 46%). International payments up 116%, corporate banking up 30%, travel money down 30% and corporate expense down 11%.


  • Valuation PE 5.9X


  • Conclusion We continue to await Dec 19 results but the company has a strong balance sheet with £42m NAV and no debt. This is now firmly in the interesting box.

19 November 2019

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Equals Group  – Acquisition   

Share Price 85p

Mkt cap £151m

Conflict Disclosure: No Holding

  • Acquisition UK based payment services provider is acquired for £1.7m with a further £2m deferred. The company provides corporate FX and an infrastructure services international payments platform. The founders of Casco will retain a 48% economic interest in the business. The acquisition price represents 2.3X the economic revenues acquired or 25X the economic EBITDA acquired.
  • Estimates. On historic figures the acquisition would add c 1.5% to EPS but close to 10% to revenue.
  • Valuation PER is 14.6X
  • Conclusion  This collection of FX/ payments businesses could well transition into a digital banking platform, but the businesses are early stage generally and there is acquisition risk.  The shares could do well medium term, but it may take longer than Argentex and Alpha FX to get there.

2 October 2019

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Equals Group – New Product

Share Price 86p

Mkt Cap £154m

Conflict Disclosure: No Holding

  • New Product. Equals launches its first live SME loan product using iwoca’s funding. The product is the “CardOneMoney Platinum Business Loan. Credit decisions are made within minutes when customers gat a virtual mastercard which is usable online. The statement says this is a new and “significant” revenue opportunity for the Group and will be the first of many credit-related products they will launch. This follows rapidly on the heels of H1 results which reported Adjusted EBITDA growth of 78% to £4.7m.
  • Estimates Forecasts anticipate £9.8m PBT for the full year which is followed by 54% growth in 2020 fading to 26% in 2021.
  • Valuation PER 14.9X. No dividend.
  • Conclusion  This looks like an opportunity to acquire a small and profitable of Monzo or Revolut growing fast.  The shares are at their lowest for 18 months. The shares are under owned by institutions. Opportunity knocks.

26 September 2019

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Equals Group – H1 Results 

Share Price 99p

Mkt Cap £177m

Conflict Disclosure: No Holding

  • Results. Revenue up 21% to £14.6m. EBITDA up 78% to £4.7m. This 32% EBITDA margin. One off costs were significant such as a marketing rebrand costing £725k so adjusted PAT was only modestly ahead after higher depreciation charges and amortisation.  EPS was down slightly at 1.72p (2018 1.79p) as more shares were in issue. Currency transactions are still 85% of revenue with the balance coming from banking transactions while corporate customers are now 68% of revenue. The outlook shows H2 revenues up 18% while a global citi group partnership has been entered into and a revolving credit facility product is in beta testing as well as Hermes FX being acquired. “Confident” of meeting market expectations
  • Estimates FY EBITDA is expected to be £11.6m. PBT £10.9m and EPS 6.2p. No dividend yet.
  • Valuation 2019 PER 16X, falling to 13.6X 2020, based on 18% undelying growth.
  • Conclusion These results read like a Monzo or Revolut with the new products coming onstream alongside the recent fund raise enabling further acquisitions. Except it is profitable and on a PE of 16X.  I can’t see a reason the shares aren’t more highly rated other than people remember a downgrade a few years ago when the profitability point was moved to the right.

9 August 2019

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Equals Group – Acquisition

Share Price 117p

Mkt Cap £193m

Conflict Disclosure: No Holding

  • Acquisition Hermes FX is acquired for £2m in cash. The founder of Hermes is joining Equals group and subscribing for 1m shares at the current share price of 117.5p/share.  With revenue of £1.8m and PBT of £0.6m this represents 1.1X revenue and 3.3X PBT. Nice price.  The company provides FX to a predominantly corporate client base.
  • Estimates With £10m PBT forecast for Dec 19 and £14m the following year this looks to be c. 5% earnings enhancing.
  • Valuation FY 19 PER 18.4 before earnings enhancement. The company had cash of £7.9m at Dec 18.
  • Conclusion Very useful acquisition. This company will do well and for those that can’t bring themselves to pay 27X for AlphaFX it is a good alternative.  

10 July 2019

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Equals Group (previously FairFX) – Trading Statement 

Share price 125p

Mkt Cap £205m

Conflict Disclosure: No holding

  • Statement Turnover up 17.5% year on year to £1.3bn with some margin improvement. The corporate expense product grew 34.7% and international payments grew 14.4%. Travel money was down 8.9% as the Group cancelled some low margin travel cash affiliate partnerships. Banking turnover rose 36.7% to £358m on the back of improved technology and the new credit broker license. The company is confident it will achieve full year expectations
  • Estimates Full year estimates are for £10m PBT and £32.6m revenue, a rise of 24.6%. EPS 6.5p.
  • Valuation 12 month rolling forward PE is 16.6X
  • Conclusion The story around the new banking products is very strong but the ROE today is 8%.  This could develop into a highly rated stock but it isn’t there yet and there are more competitors eyeing up this lucrative FX space that the banks have left wide open. With 30% EPS growth forecast to December 2020 the shares will probably also appreciate 30%. But I do want to know who thought up such an odd name.

17 June 2019

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FairFX Group Plc – AGM 

Share Price 110p

Mkt Cap £180m

Conflict disclosure: No holding

  • Statement – While the statement concludes “in line with expectations” the company says it has had a strong start to 2019 in terms of both turnover and margins. The supply chain rationalisation is now delivering alongside 2018 investments delivering new products such as the Bank of England settlement accounts and access to the faster payments service
  • Estimates – Forecasts look for a 25% increase in turnover to £32.8m with a 34% PBT margin of £11.1m compared to last year’s £2.1m
  • Valuation – PER is 16.9 on Dec 19 earnings, which equates to 5.4X turnover
  • Conclusion – This is a key time for FairFX as the profitability ramps up strongly.  If the company can deliver on this years margin the forecast going forward is for the PBT margin to increase from 34% to 36%. It doesn’t normally grow incrementally.  The shares are the same price as 12 months ago. Over the next 12 months it is possible to see 50% upside. They just need to deliver on the numbers.

26 April 2019

Fair FX – FY Results 

Share Price95p

Mkt Cap £155m

Disclosure : No holding

  • Results  Revenue up 39% on a like for like basis to £26.2m and PBT of £6.8m (2017 £0.9m). Outlook evidences 43% like for like revenue growth in Q1 2019 and references the launch into US markets while profit margins should improve on the back of supply chain rationalisation. CEO says he is “confident” of meeting full year expectations
  • Estimates Full year estimates unlikely to change which assume c 50% PBT growth.
  • Valuation PER 23X . With £8m of cash on the balance sheet we may even start to get a dividend.
  • Conclusion This company operates in a very large market and the shares are 37% below last September. The downgrade at the end of last year was due to the difficulties of projecting at this stage of development.  This is one to own when the share price anticipates disappointment as it does now. 22X current year with 50% growth is a very attractive proposition.

25 January 2019

Fair FX – Trading Update  

Share Price 107p

Mkt Cap £166m

  • Update Volumes are up 111% to £2.36bn and FY 18 EBITDA is expected to be £7.5m. International payments were up 134% and pre pay card volumes up 8%.  Corporate cards were up 30% while retail custoners grew 43% to 1,040,000. Removal of a layer of the supply chain has been slower than expected and so the resulting margin improvement will now come through in 2019. The outlook is for “significant growth”
  • Estimates House broker (Cenkos) estimated £8.3m EBITDA for 2018 so this is a miss presumably on the delayed supply chain rationalisation. The 2019 EBITDA estimate was to increase 106% to £17.1m which may come down today, albeit still significant growth
  • Valuation PER 11.8 before downgrades
  • Conclusion High growth businesses are inherently difficult to forecast and the low PER suggests the market was sceptical of the numbers.  This company is growing fast and wont take long for the earnings to outgrow the share price. But a miss today is unlikely to be good for the share price – which may represent an opportunity for some.

6 July 2018

Fair FX – H1 Trading Update  

Share Price 114p

Mkt Cap £177m

·         Update H1 revenue was £1.1 – “in line with expectations”.Like for like revenue was up 22.5% with pre paid cards up 8.5% and international payments up 39.1%bn. Margins are reported to be strong and the integration of Cardone and City Forex is on track. Synergies are being extracted from owning the whole travel money supply chain. The board is “confident”.

·         Estimates  Trading is said to be “in line”

·         Valuation  The Dec 18 PBT expectation is £7.7m which puts the shares on a PER of 23.3. No dividend is expected. In the year to Dec 19 the PER drops to 12.5. Alpha FX is a different business but it trades on 26X falling to 22X

·         Conclusion The business is I suspect a long term winner but Revolut is moving fast up the race track and is valued as a Unicorn in the private space which means there are significant competitive risks.  The aggressive earnings growth estimates suggest the share price is taking a lot on trust.