FairFX Group Plc (FFX.L) is a leading challenger brand in banking and payments that disintermediates the incumbent banks with a superior user experience and low cost operating model. This enables personal and business customers to make easy, low-cost multi-currency payments in a broad range of currencies and across a range of FX products all via one integrated system. Banking and payment services to both personal and business customers are made through four channels: Currency Cards, Physical Currency, International Payments and Bank Accounts. The FairFX platform facilitates payments either direct to Bank Accounts or at 30 million merchants and over 1 million ATM’s in a broad range of countries globally via Mobile apps, the Internet, SMS, wire transfer and MasterCard/VISA debit cards.
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On July 6th2018, FFX published a trading statement for the six-month period ended 30thJune 2018. The Company reported a strong first half of trading, with substantial growth and new products launched. Against this background, strong margins have been maintained and rationalisation of the supply chain is delivering results. Including contributions from newly acquired Cardone Banking and City Forex, FFX reported a 146% increase in turnover for the year on year period to £1.1bn (2017: £434.1 million), in line with management’s expectations. The strong first half gives the Board confidence that the Company will achieve market expectations for the full financial year. CEO Ian Strafford-Taylor said the fact that the substantial growth in turnover has been achieved without reduced margins “gives us great confidence for the prospects for 2018 and beyond.”
The impressive progress by FFX since Feb 2018 did not go unnoticed by VectorVest. A Relative Value flag (RV is an indicator of long-term price appreciation) had originally alerted members back as far as Sept 2017, as the level moved above 1. The FFX RV has remained well above 1 since that time, and today logs the stock at 1.71, which is both exceptional and excellent on a scale of 0.0 – 2.0. Other leading metrics on the VectorVest stock and portfolio management system include a GRT (Earnings Growth Rate) of 48%, again both exceptional and excellent, along with a good RS (Relative Safety) rating of 1.12, also on a scale of 0.0 – 2.0. Even so, trading today at 138p, FFX is still some way below the current VectorVest valuation of 183p.
The chart of FFX is shown above in my normal format. The green line study above the price is the VectorVest valuation while Earnings per share is reflected by the blue line study in the window below the price. Technically the share is trending higher but currently “coiling” within a symmetrical triangle. A breakout of the upper trendline defining the triangle should lead to a strong move upwards.
Summary: FFX already dominates what is a highly competitive space with its secure low cost, multi-currency payment solutions. Eagle eyed VectorVest members who spotted this opportunity back in September last year will already have seen their investment double in value, but as the fundamentals and charting configuration indicate today, there is a great deal more growth to come. FFX stated that H2 is about extracting efficiencies via scale, evolving banking products for SME’s and continuing to identify and maximise cross-selling opportunities. On the evidence presented today, this innovative financial services challenger brand will continue to deliver growth with this strategy, and in the opinion of VectorVest, offers a compelling investment opportunity right now. Buy.
Dr David Paul
September 26th 2018
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