MIDAS SHARING TIPS: Equals Group Could Pay You More Than Vacation Cash
Depending on who you ask, the fintech market is valued between £150bn and £250bn.
The range says it all. Statistics are unreliable, definitions vary, and it is difficult to value an industry that is immature and accident-prone.
Even the most ardent fans would admit that fintechs, as they are known, have experienced some high-profile disasters, most notably Silicon Valley Bank.
Office of All Change: Equals started out providing travel money to tourists, but found more lucrative work serving smaller businesses as well.
And despite years of rapid growth, very few operators actually turn a profit. equal group is different.
The company is making money, expanding rapidly, and expects to start paying dividends later this year.
The shares cost £1.16 and should rise materially as chief executive Ian Strafford-Taylor develops the business, adds clients and moves to new parts of the world.
Founded over 16 years ago as FairFX, the group initially focused on providing consumers with money for travel through prepaid cards. Rates were invariably better than those at banks or post offices and business prospered.
However, competition intensified, so Strafford-Taylor decided to add another string to his bow: offering foreign exchange services to companies, particularly entrepreneurial companies with between 50 and 500 employees.
The decision turned out to be correct. Companies of this size feel increasingly unloved by the high street banks and are eager to move their clientele elsewhere.
Traded in: AIM
Contact: equalsplc.com or Buchanan Communications on 020 7466 5000
Traditional banks are also often bogged down with legacy systems, so transferring and receiving money from one country to another through them can be cumbersome and expensive. Strafford-Taylor had none of these problems and from the beginning was determined to offer the best service and excellent value for money, with better exchange rates, fast payments and expert advice where necessary. Offering all this has not been an easy task.
The company, rebranded as Equals in 2019, has obtained licenses and regulatory approvals around the world. That means customers can now do business in over 100 currencies, open secure accounts and complete transactions in minutes.
Payment cards are also available, a boon for businesses involved in e-commerce. These cards may have limits to ensure staff do not overspend on overseas trips.
Around 150,000 consumers still use FairFX cards, but the company is seeing its biggest growth on the business front, attracting more than 30,000 businesses across all lines of work, from fashion to health to film production. Larger companies are also seeing the value of Equals’ offering.
Around 150 large companies have signed up for at least one service and the numbers are increasing rapidly. Provisional figures last week showed a 43 per cent rise in turnover to £45m for the six months to the end of June compared to the same period in 2022, with pre-tax profits soaring from £900,000 to £5.8 million. The outlook is good, to the point that Strafford-Taylor plans to pay an inaugural dividend of 1.5p by 2023, rising steadily thereafter.
Brokers expect annual profits of £19.5m, up 65 per cent year-on-year, rising to £23m in 2024, with a 2p dividend. Growth so far has been organic and through acquisitions, and more deals are likely to follow, allowing Strafford-Taylor to offer clients more services in more locations quickly and efficiently.
MIDAS VERDICT: Equals Group is that rare beast: a cutting-edge financial technology company that is expanding, profitable, and about to pay dividends. At £1.16, the shares should deliver long-term growth.
Two tips rise 40% after bidding
It seems as if every week new evidence is emerging that American investors value British companies more than their domestic counterparts.
Some companies are choosing to go public outside of London. Others are being captured by cunning international predators.
While the authorities grapple with this issue, there are occasional benefits for British shareholders.
In the last fortnight alone, two recent Midas recommendations have received takeover bids from overseas bargain hunters.
Last week, delivery specialist DX Group admitted a 48.5p share approach from private equity team HIG, a deal that has already been accepted by several large shareholders.
Just days earlier, royalty firm Round Hill Music succumbed to a £376 million bid from Nashville-based music giant Concord.
Midas tipped DX at 32p in July and the shares closed at 43.5p last week, below HIG’s offer price. Round Hill, which was trading at 63p in June, rose to 90.5p after the board advised shareholders to accept Concord’s offer.
That deal is now almost certain to go through, giving investors who bought in June a nice windfall.
DX’s offering is a little less certain. HIG has until October 9 to make a firm offer and may withdraw before then.
But other bidders could emerge, as DX fans believe the shares are worth at least 50p.
Nervous investors may want to pocket their 32 percent gain now. Others should hang in there and see how this party plays out.