FairFX: Recent price fall is probably overdone

Now trading at nearly 42% lower than its peak 152p in September last year, the shares of FairFX (LON:FFX) at 89p could well be worth tucking away, especially if we can get Brexit over and done with.

The company is an international payment services provider, offering services to customers in the UK since 2007. The Group has developed a cloud-based Peer to Peer (P2P) payments platform that enables personal and business customers to make easy, low-cost multi-currency payments in a broad range of currencies and countries and across a range of foreign exchange products via one integrated system.

The platform facilitates payments either direct to bank accounts or at over 30m merchants and over 30m ATMs in a broad range of countries globally via Mobile apps, the Internet, SMS, wire transfer and MasterCard/VISA debit cards.

FairFX provides banking and payment services to both personal and business customers through four channels: Currency Cards, Physical Currency, International Payments and Bank Accounts.

The Currency Card and Physical Currency offerings facilitate multiple overseas payments at points of sale and ATMs, whereas the International Payments channel supports wire transfer foreign exchange transactions direct to Bank Accounts.

For Corporates, it has a market-leading business-expenses solution based around its corporate prepaid platform and card that can yield significant savings on a Corporate’s procurement through better controls and improved transparency and also streamline the procurement process thus saving administrative costs.

Through the recent acquisition of CardOne, the company now has the capability to offer retail and business Bank Accounts with all the functionality one would expect from a Bank, namely faster payments, Bacs, direct debits, international payments and a debit card.

The company has taken a revolutionary approach to the whole foreign exchange market for both individuals and businesses. It has cut out the middle man and uses state-of-the-art technology to execute customer orders. By eliminating expensive Travel Money bureaus and kiosks, it can supply its 1m plus consumer and business customers keenly-priced Travel Money in a highly convenient fashion.

Strong growth was shown in 2018 with turnover, boosted by acquisitions, more than doubling from £1.2bn to £2.36bn. EBITDA in the last year jumped to almost £7.5m up from just £1m the previous year. Looking forward, the company expects to improve margins as it removes a layer of supply chain in its Corporate Card division, a process that has taken longer than anticipated.

The Outlook Statement with the Trading Statement announced a couple of weeks ago stated that, “Whilst Brexit uncertainty depressed Sterling against the Dollar and Euro during FY18 weighing on customer sentiment and activity, the Group demonstrated significant growth through the year.  Ongoing, and even potentially lengthened, Brexit negotiations continue to provide macro-economic headwinds for the business. The Board is pleased to confirm, however, it expects 2019 to be another year of significant growth.”

Its declared Strategy is “To create the market leading e-banking provider” – through both innovation, scale and efficiency. It has also now achieved a springboard through a joint operation into the US marketplace. Its Business Target is to have 200,000 customers, its Consumer Target is 2m customers. It has massive potential in cross-selling across its existing customer base.

Although it was the Brexit note that knocked the share price, I think that it has been overdone, enabling patient investors a buying opportunity in what is obviously a fast-expanding company.