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I had the great good fortune of being able to attend the Shares Magazine ‘Growth and Innovation’ Forum at the Business Design Centre in Islington (same venue as Master Investor) on Tuesday 30th January and as always I was very focused with regards to which Companies I spoke to and I spent the majority of my time there meeting up with some truly top quality Investors that I talk to regularly in the Virtual Twitterworld etc. but sadly get rare opportunity to speak to in ‘The Real World‘.
I always approach Shows in this way - to me the Value is in knowing well beforehand which Companies you want to meet with and doing at least a small amount of Research so that you have a fair understanding and are able to quiz the Personnel on the Stand with relevant and meaningful questions. I then make sure I spend a lot of time with them and explore all areas of the Business to get a full understanding and it is a very efficient use of time. This means I can get a lot more out of my discussions but also I find that the People exhibiting are much more friendly and open to talk in a relaxed manner because they actually appreciate someone who goes a level deeper and isn’t just a fresh face who has presented themselves in front of their Stand and wants the Company People to trot out the same old Introduction and Blurb over and over again, before picking up a Free Pen and a Brochure. I feel for these guys because in my murky past I have done a fair bit of Exhibition Stand work and it can be soul destroying sometimes - especially when Punters ask you the most stupid Questions or worse still tell the Directors how to run the Business !!!
For health reasons I tend to get to these things around Lunchtime and this means that by the time I am fed and watered we are well into the afternoon and by this time many Punters have left the Event already and it means I get the people on the Stands all to myself - lovely.
This time I wanted to speak to three Companies although on the Day I only managed 2 - but I am not overly concerned because the third one Yu Group YU. is not something I am close to buying although it does look interesting - I might do some Desk work on this one at some point. The other two were EU Supply EUSP and FairFX FFX which I managed to speak to in depth.
EUSP I hold a few Shares in myself after buying on Monday 29th January but it is a tiny Business and therefore pretty high risk - but I came away from my discussions even more keen on them and I am very happy to hold these - and at some point I might buy a bit more but it is not something to go crazy on. My plan is to start work on a ‘Buy Rationale’ Blog for EUSP after this one but in the meantime I wanted to knock something up fast on FFX while it is fresh in my head but I will not do a full Blog on FFX due to time constraints (I might however do a complete Blog if and when I buy some FFX).
I will keep this all simple because really the intent of my Blog here is just to flag to Readers that FFX might be worth doing proper Research on and then you can go off and do your own thing on it. In essence FFX provides Customers (think ‘Individuals’) with a Mastercard which they can then use to ‘Charge up’ with Foreign Currency in a cheap and easy manner which they can then spend while they undergo their Travels (they can have Dollar Cards, Euro Cards and Cards for multi-currencies).
There is an App as you would expect and these kind of Individual Punters are acquired very easily with most of them signing up via an online process (website or App) and this is often after finding out about FFX on a Price Comparison Website like ‘Money Saving Expert’ or similar. They also do some Sports Sponsorship (a Football Team of some sort was mentioned !!) and I was told they are about to start some Sponsorship of the Yamaha World Superbikes Team but this was interesting because it was more about working with other Sponsors of that Bike Team rather than direct advertising for FFX themselves.
However, there is a big drawback here and the Gents on the Stand were very open about this - the Individual Punter side of the business is extremely competitive and they are deliberately putting their Focus and Effort into the Business Accounts side of things. Whereas with Individual Punters they have no special competitive advantages, when it comes to the Business side they have a huge and unique advantage in that they are the only Provider of this kind of cheap Foreign Exchange Card which comes with a full Expense Management Suite alongside it - this has big appeal for Businesses. Some Businesses often say they don’t need it because they already have a system but I was told that the FFX Expense Platform integrates fully with ‘Concur’ which seems to be the SAP Expense Module (SAP is probably the leading Accountancy Solution for medium and large businesses along with Oracle Financials).
I might have the numbers in this Blog wrong so you will need to check them but at least they will give some idea and an order of magnitude. If I have got this right, I was told that they have something like 600k Customers in total but around 80k Businesses are signed up (and they then have loads of Business Users with FFX Cards out in the field) - this actually really surprised me and I questioned the veracity of this and was told it was correct and it is growing fast.
FFX also enable Customers to obtain their Foreign Currency as Cash and this can be ordered over the Website and App. FFX is Online and Phone only and has no physical Shops or anything like that. They also offer International Money Transfers as well.
There were 2 Guys on the Stand and both very helpful and engaging and happy to talk in an informal manner which is exactly what I like. One was the Chief Commercial Officer James Hickman (I think that was his title - I just scribbled the acronym CCO down thinking I would remember what it stood for - sorry James !!), and the other was the head of a fairly new Office they have in Dublin, called Neil Walsh (Head of Irish Division). This was interesting because I questioned the need for such individual Country Offices with everything having an Online and App element but the logic is that with their Business Customers (and remember this is where the Growth and Focus is) it is helpful to be able to meet with them if needed and have some sort of Country Presence. I don’t know the proportions but Business Customers are partly signed up by ‘Self-Service’ online where there is little if any interaction with FFX and others are signed up over the Phone and others might be signed up with Face to Face meetings and suchlike (I presume these are the really large ones).
As an aside, I picked up that James Hickman seemed to know a bit about Shares in general and when I queried this he told me about a former life of his working as a Fund Manager which was fascinating !! With such a background he is clearly well qualified to know that FFX Stock is decent value and the Guys on the Stand were also very confident that the Growth Forecasts could be achieved.
They recently did an acquisition of CardOne which is really a Subprime Bank / Card Lender and the idea here seems to be in order to give FFX the ability to provide their Customers with a Digital Banking capability and it is expected to speed up growth and scale. On the back of this acquisition FFX plans to rollout their ‘Fair Everywhere’ multi-currency Bank Account product in the first quarter of 2018 with a focus on the business sector and SMEs (Small and Medium Sized Enterprises). You can read the RNS regarding the acquisition here:
FFX recently put out a Trading Update on the 18th January which reads very well with strong growth and you can see it here:
You can see FFX’s Customer Website here:
And the Investors bit is here:
As many Readers are probably fully aware, I use ShareScope as my ‘Daily’ Workbench Software but I recently subscribed to SharePad as well because I wanted something I could use with my 10” Tablet - ShareScope sits on a PC and I tend not to power up the beast until later into the evening. It costs something like £50 a year on top of my ShareScope subscription but it is very impressive and well worth that expense.
Anyway, I was using it tonight to look some stuff up and I noticed a ‘new’ screen that had appeared called ‘Ratios’ (it might not be all that new - firstly I don’t go into SharePad much and secondly I am not particularly observant !!) and the great thing is that it includes things like the PE Ratio but also has the Forecast Numbers. Normally I would need to take the Forecast Earnings Per Share (EPS) Numbers and work the P/E out with a Calculator myself but because this is online and nearly ‘Real Time’ the numbers look pretty accurate. And another great thing is that you can Chart any of the Ratios you like just by ‘dragging and dropping’ a line item (by the way you can do the same thing on any of the Financial Screens SharePad has like Balance Sheet, P&L, Cashflow etc.) - anyway, here is a ScreenShot for FFX and I have set up a few Charts on the Right:
As always if you click on the Picture it should become bigger on your Screen so you can see it. Because FFX is a fairly new business (it says on the Investor Website that they have been going for 10 years), they are only now getting into true profitability and as a consequence there is very little if any Historic Data in the Ratios shown on the Screen. Anyway, what we are interested in is the line marked ‘PE’ under the heading ‘VALUATION RATIOS’ and if you look across to the Right then you should see a PE of 16.4 for 2018 Forecast and 8.8 for 2019 Forecast.
Now you might say that 2019 is a long way off but of course we are now getting stuck into Calendar Year 2018 and clearly 2019 will be on us very soon - so a Forward PE of 8.8 looks pretty cheap to me for the Growth that is likely to be delivered here.
On the Right there are 3 Charts but they are a bit limited because of the lack of Historic Data - anyway, I have shown them to give Readers an idea of the power SharePad has. Note a PEG of 0.2 is extremely low - this is the Price Earnings Ratio divided by the Growth Rate and usually a figure of 1.0 or below is seen as cheap. 0.2 is extremely cheap.
Working on these numbers, I would think an Initial Target around 120p minimum would be very doable. If you were to be driven by the PEG, then the Upside could be considerable - 200p perhaps?
The key here is the Growth Rate and that is something that anyone considering investing in FFX needs to look at closely and think hard about.
James Hickman also talked about the Cash Position (obviously this was something I raised as the Balance Sheet of any Company is a critical part of any potential Investment) and he said there had been a Placing as part of the CardOne acquisition but even after that their Cash had gone up - so clearly they are generating a lot of Cash and this is very good. Needless to say this needs to be researched and checked thoroughly.
Here is the Share Pad ‘Brokers’ Screen which has some more detail:
This is always a handy SharePad Screen so I have bunged it in:
I have thrown in the Screen below as well because it has some useful stuff:
I would normally jump over to my ShareScope software and bash a Chart out in milliseconds but I decided to persevere and create a SharePad Chart in order to show Readers what it can do. I’m finding this tough because I just never use it but here is an attempt at a Long Term Chart with all the data since FFX listed in 2014. On the Left you should see my Arrow with Black Boundary Lines pointing at a Downtrend Line and then on the Right you should be able to see my Blue Line Arrow which is pointing at an Uptrend. Note however that the Price has dropped down below this Uptrend Support Line recently which isn’t so great.
On the Chart below I have reduced the timeframe a lot and now you should be able to see the Downtrend Resistance Line that I have drawn in Red and pointed at with the Arrow that has Red Boundary Lines. It could be a good time to Buy FFX if and when it breaks over this Resistance Line.
Lower down with my Black Boundary Line Arrow I have pointed at the 200 Day Moving Average Line - it could be a good area to buy around here if it drops down to it - that would be around 70p ish. Perhaps a shrewd Trade Plan would be to buy some if they dip to the 200 Day MA Line and then to buy more if and when they Breakout of the Red Downtrend Line. Personally I wouldn’t obsess about the timing - if you really want a Stock and the Price is right and the Value stacks up (as it clearly does on FFX) then it is often just best to buy it.
That’s it for now - a short Overview really to give Readers a feel for FFX and to point to the possible Value here. It is all about Growth and if FFX can achieve those aims then it will have been a very cheap buy now and judging by the recent Trading Update and the tone I got from the Guys on the Stand, it looks quite possible. The Risks are really around Competition and the Growth not meeting some pretty high expectations and as a longer term thing the introduction of FinTech type stuff might make life hard for FFX - although of course it is very possible that FFX themselves get abreast of such developments and create their own solutions using FinTech systems.
Any Macroeconomic problems might hit Travel and therefore the need for FFX Cards, and in a similar way if Brexit goes badly off the rails then this might impact as well - but of course anything like this would most likely be a short term problem. As always, it would be wise for potential Investors to put their focus on Risk first and foremost and to ask themselves the question “Why should I not buy into this Stock?”
Over to you…….
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