Extreme currency volatility with Trump Tariffs... even more of a need for ALPH's products. |
Fed hold rates today. Fed chair declines to provide ‘any response or comment whatsoever’ on president’s public demands for lower rates. Trump is a real estate guy and wants lower rates. We may get there slowly, but it is notable financial sector is again one of the strongest if not the strongest investment sector that will see double digit returns and are still on low valuations. But there are voices that say we are at neutral rate and in the goldilocks zone for NTI and global growth. |
Post script: At 2237p prior to the TU we've had a strong move up to 2463p as I type a 10% rise in three days. ALPH has moved out of the four month sideways channel. Mr Market appears to be responding to the return of organic growth.
As I previously described ALPH has characteristics that work in their favour throughout the business cycle. If we now have an environment with organic growth and high interest rates perpetuating - then ALPH should do very well. |
 Alpha Group International plc, with a market capitalisation of approximately £1 billion, offers foreign exchange risk management and alternative banking solutions across the United Kingdom, Europe, Canada, and other international markets.
Revenue streams primarily come from its Alpha Pay segment (£72.30 million) and Institutional segment (£67.47 million), along with additional contributions from Corporate Toronto, Corporate Amsterdam, and Corporate London (excluding Amsterdam).
Alpha Group International has achieved an impressive earnings growth of 46.3% over the past year, significantly outpacing the Capital Markets industry's growth rate of 12.5%. This remarkable performance is further supported by the company's debt-free status, enhancing its appeal in terms of financial stability.
With NTI the company's price-to-earnings ratio stands at a favourable 10.6x, compared to the UK market's average of 16x, indicating good relative value. Moreover, Alpha benefits from high-quality non-cash earnings and positive free cash flow, which are likely to sustain its robust financial health and drive future growth. |
 Pleasing to see Mr Market respond positively to this update - with underlying growth of 23%. Whilst it's 'only' in-line with expectations for underlying profit before tax and profit margins - it's a fantastic growth rate in difficult market conditions.
It would however be extremely useful if they actually stated what those expectations are in the RNS news release. Brokers' forecasts are in the public domain so there is no constraint on stating them in the TU. For example, see 20 Jan Judges Scientific - footnote:
1. Current consensus market expectations for the year ended 31 December 2024 are Adjusted basic earnings per share of 276.8p.
But I digress, back to the TU. Thanks to the current high interest rates the interest income continues to pour in £85m up 11% on 2023. Despite the £30m in buy-backs (£10m more in-progress) 23% of the market cap is accounted for by £217m of cash.
That's a lot of cash to be sitting on. It would be great if they could find a compatible bolt on like Cobase (client numbers and revenues increased by 59% and 70% resp.) but I suspect that it'll be more buy-backs. IMHO it would be nice to get a special dividend together with a share re-investment option.
Looking across the business units - all's well and moving in the right direction and with a positive outlook statement.
So, an excellent TU I reckon. |
Yes, fair point, Dave. One of my other stocks, QQ, took a bit of a nosedive today despite meeting expectations. However, the key takeaway with ALPH is its lowest valuation multiples, which position it as an extreme deep value with its outsized NTI. We'll see how things develop tomorrow and throughout the week as institutions digest the information and gain more clarity on the macroeconomic picture. |
This is shooting up now |
Very strong update. Expect a delayed reaction given the institution holding base: |
Interest Income: Mr Market apparently considers it to be poor quality - each pound is worth only about 50p ;-) |
Today, I read that Wells Fargo has raised its interest income forecast, driven by robust dealmaking, which in turn boosted their share price by 6%. Similarly, JPMorgan Chase exceeded expectations for net interest income, propelling its shares upwards and marking record profits for any bank.
Across the pond, they tend to boast about such achievements, while ALPH continues to remain modestly humble even embarrassed! |
Apologies this is a low evidence based, low brow, short video link from me as to what is happening to the ALPH share price amongst the institutions (tiny PI volume). Similar happened this time last year. Note pre-fix the number 2 to the values shown here to get ALPH's share price. Enjoy: |
VERY STRONG job numbers from the US. Arguably too strong impacting US Financials negatively as well as the wider market in general. The market was clearly not ready for delayed rate cuts, this should be favouring ALPH immensely. We can observe the US2Y go up by more than the long end rise. The market is wrong to mark ALPH down today and this is a buy opportunity. |
While the market expects more rate cuts US bond yields are heading higher today with an risk of rate hikes again. What we don't want to see is further deterioration of the labour market but if that happens we'll be back to something like 3.75% and correct the direction again. This is not a bearish post, the environment for ALPH remains stronger and stronger and my other financials are doing well.. |
Clive Kahn starts today |
After the pull back yesterday in markets and as of now U.S. financials are now the top performers, likely due to the neutral rate being around 3-4% going forward and possibly for a while longer at 4%. Much depends on Tarrifs but we have to also believe economic growth will get there in the end. Can't think of anything better to invest in especially on an EV/EBITDA |
Christmas party next 🎄 |
Morgan's leaving bash tonight. |
And as soon as a day ago Millennium International Management Lp reduced this short. Looking at the technicals it seems algo driven helping to create volume and liquidity on the swings while they aim to profit. May help our buy backs as we do seem to buy more on the pull backs closer to 200-day. |
Short position increased 2-days ago. Looking cheap relative to the rest of the market for a growth company. Happy to add. |
@davidt345 Thanks for your feedback on the spreadsheet. When I model your growth prospects, it becomes evident that Alpha Group has a robust overall outlook. The projections indicate significant cash accumulation on the balance sheet, reflecting a low valuation. This suggests a strong potential for economic growth. Given this trajectory, 2026 could be a standout year for the company. Additionally, there may be interest in a takeover as early as next year in anticipation of this growth and continued strong balance sheet.
I do think investors then have to talk to the company about the tricky subject of what happens to the buyback shares held in treasury as so should be growing and *some* should be cancelled. |
RNS just announced that BlackRock's voting rights have increased to 5.11%, up from their previous 4.77%. Tipranks commented on the development, stating: 'This acquisition signals a strategic move by BlackRock, a prominent investment management corporation, enhancing its influence within the company.'
My opinion is that this is for a new position in BlackRock Throgmorton Trust, and we may start to see it appearing here in time: hxxps://www.blackrock.com/uk/literature/policies/throgmorton-portfolio-disclosure.pdf |
The share price is moving up nicely. The bond market is anticipating only another 25 basis points cut so base rates are projected to stay around 4% or above. To support deal activity, maintaining stable rates is crucial, provided they stay below 6%, where 6% and above businesses begin to face difficulties. |
Hello MrScruff
Some interesting thoughts and spreadsheet, thanks.
My thoughts on the net treasury income:
The client cash balances have been growing over time as the business has grown, and I submit that the balances will grow at a faster rate as the UK and world economy picks up and interest rates fall.
I think a fall in the Bank of England base rate to 3% over the next 2 years. A fall in base rates from 5% to 3% is a 40% fall in the interest rate.
Assume/guesstimate a proportionate fall of 40% in Alpha's interest rate that it earns on client cash balances, so 3.8% falls to 2.3%.
If client cash balances grow 50% over the next 2 years, they will end up earning £2.2bn X 50% X 2.3% = £76m per year, just under your £78m of NTI earnings this year.
So I think this part of the business, although outside of management's control, was never going to go away. Indeed I believe within 2 years this will be growing strongly, all while the rest of the business should pick up strongly on the back of quite good global economic recovery. To put it simply, their earnings on NTI will not really shrink because falling rates will be accompanied by much larger client cash balances.
All those foundations Alpha put in place over the last 2/3 years in particular have not had chance to really motor yet. But the clues are there; while others have suffered, they have been very resilient and showed strong performance against the tide. |
Fair points. The inflation is not coming down quick enough and FED is going to take a cautious approach.That's a great idea - thanks for doing the sheet. I will check it out. |
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