Alpha FX Group PLC

Incorporated in 2010, Alpha FX Group PLC is a FTSE AIM 100 listed Company, which deals in the provision of foreign exchange services for corporates exposed to currency market volatility.

Investment Rationale – Sell at GBX 1,140.00

• From trading multiples perspective (EV/EBITDA, EV/Sales, and Price/Earnings), the stock seems overvalued as compared to the Financials industry.
• From a technical perspective, 14-Day RSI (56.27), reflecting a significant downward trend.
• The Covid-19 pandemic continued to create material uncertainties for the trading environment.
• The net margin has remained below 20%, which is lower than the industry median.

Risk Assessment

• The Company’s performance is subject to certain liquidity and credit risk arising from the volatility presented by the COVID-19 disruption.
• Moreover, there is a constant risk of failing to adhere to legal and regulatory requirements.
• To meet the new regulations, the Group needs to implement new processes, failing to do so would increase the compliance risk.
• The business operations can be impacted negatively due to the foreign exchange rate fluctuations.

Trading Update (as on 1 October 2020)

• The trading in September remained strong and encouraging across all business areas.
• The growth was witnessed from both alternative banking ad FX risk management business as it continued penetration across Europe, UK, and Canada.
• Therefore, the Company has increased its expectations for FY20 earnings. Considering its bad debts provisions, the earnings will be in line with FY19 earnings.
• However, macro-economic uncertainties are likely to remain in the short-term.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion – Take Profits Off the Table

The trading in Q2 FY20 was down against Q2 FY19 due to Covid-19 disruption. Moreover, the risk remains in the short-term regarding foreign exchange rates, accounts collection, and international payments. Furthermore, the stock is trading close to a 52-week high amid overvalued multiples and unfavourable 14-day RSI, which is raising doubts over the upside potential. Stock 52 week High and Low were GBX 1,370.00 and GBX 465.00, respectively.

Given the heightened level of uncertainties, we recommend a “Sell” stance on Alpha FX Group  PLC at the current price of GBX 1,140.00 (as on 19 October 2020, before the market close at 10.20 AM GMT+1), while we look forward to reviewing the support from upcoming catalysts to reinvest.  

Boku Inc

Boku Inc is a provider of carrier commerce and mobile identity solutions. Its technology platform provides a solution related to identity, sales systems, and billing. It is connected to over 190 mobile network operators globally.

Investment Rationale – Sell at GBX 114.11

• From a valuation perspective, the key trading (Price/Earnings, Price/Cash Flow, EV/Sales, and EV/EBITDA) multiples are quite overvalued as compared to the Industrials industry.
• From a technical perspective, 14-Day RSI (76.86) indicating a downward trend.
• The net margin has remained lower than the industry median for the past four years.
• Identity division revenue was impacted by US$2.7 million due to Covid-19. 

Risk Assessment

• BOKU needs to invest heavily in innovation and system maintenance and, any failure to do so will impact the brand royalty and may affect the Company’s financial performance.
• Excessive competition in the industry could affect the revenue and profitability of the Group.
• The Company operates in multiple geographies, and its profits can be impacted negatively due to foreign exchange rate fluctuations.
• The Company’s performance is dependent on third-party vendors such as MNOs (mobile network operators) and SMS aggregators, and therefore, failure in payment from carriers to merchants can impose further peril to operating results.
• Cybersecurity threats, including data theft and hacking, can potentially harm the relationship with customers.

Recent News

24 September 2020: Charlotta Ginman was appointed as an independent Non-Executive Director with immediate effect. She also became a member of the Company's audit and remuneration committee.

Interim Results for the year ended 30 June 2020 (as on 16 September 2020)

 (Source: Company Website)

• During H1 FY20, adjusted EBITDA was 84% higher than H1 FY19 due to strong growth in Payments revenue while Identity division remained resilient.
• The Company reported an operating profit of US$0.2 million, as compared to an operating loss of US$2.3 million in H1 FY19.
• As of 30 June 2020, Boku had cash of US$80.7 million.
• There was a 33% increase in Monthly Active Users of the Boku platform while there was good progress with eWallets.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion – Take Profits Off the Table

The revenue of Identity division was impacted by $2.7 million in H1 FY20 due to Covid-19 crisis. Moreover, the trading environment is likely to remain challenging in the short-term considering the travel, restrictions, weak macroeconomic indicators, and reduced merchant volumes. Also, the stock is trading close to a 52-week high while the trading multiples are overvalued as compared to the industry. Therefore, it is raising doubts over the upside potential. The stock has already yielded a return of 33% over the past six months, and it is giving a lucrative opportunity to book profit now and reinvest the realised amount at the right position. Stock 52 week High and Low were GBX 119.00 and GBX 48.00, respectively.

Given the heightened level of uncertainties, we recommend a “Sell” stance on Boku Inc at the current price of GBX 114.11 (as on 19 October 2020, before the market close at 10.02 AM GMT+1), while we look forward to reviewing the upcoming catalysts and reinvest at the right price. 

*All forecasted figures and Industry/Peer information have been taken from Refinitiv, Thomson Reuters.

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