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Alpha FX stays bullish

Is currency risk management a haven amidst the market chaos?
March 19, 2020

Shares in Alpha FX (AFX) have gone on an interesting ride over the past year. Every few months, the currency risk management and payments group will issue an update explaining trading is “ahead of market expectations”. This is then followed by rampant buying and earnings upgrades from broker FinnCap, which as far as we can tell is the sole arbiter of those market expectations.

IC TIP: Hold at 874p

The reasons for this virtuous cycle remain the same: greater numbers of clients are spending greater amounts on the London-headquartered group’s currency hedging services. Although headline customer numbers increased by 34 per cent in 2019, this excludes what Alpha FX classes as ‘training accounts’, which have generated less than £10,000 in revenue since being onboarded.

Excluding these accounts, average revenue per client was up 12 per cent to £54,600, which founder and chief executive Morgan Tillbrook said was “testament to the quality of our more mature hires and their ability to develop further along the learning curve”.

Junior staff are expected to move up that curve quickly. However, how this surging sales momentum will be impacted by the current shutdown of face-to-face social contact remains to be seen. Less than a year after a move to a larger Paddington office, management now trumpets that the company’s 124-strong team has “always been very well placed to operate remotely”. The impact of profound bouts of recent market volatility has also reportedly been limited.

“Market expectations” are for earnings per share of 41.6p in 2020.

ALPHA FX (AFX)   
ORD PRICE:978pMARKET VALUE:£361m
TOUCH:950-1,050p12-MONTH HIGH:1,370pLOW: 633p
DIVIDEND YIELD:0.8%PE RATIO:na
NET ASSET VALUE:148pNET CASH:£66.3m*
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20168.54.313.4nil
201713.55.614.24.9
201823.59.721.86.5
201935.41427.77.6
% change+51+39+27+17
Ex-div:9 Apr   
Payment:13 May   
*Includes lease liabilities of £7.64m