Introduction of higher-margin options divisionAverage revenue per customer up 45 per cent Currency management group Argentex
- Introduction of higher-margin options division
- Average revenue per customer up 45 per cent
Currency management group Argentex (AGFX) is effectively a foreign exchange middleman for corporations and private individuals – a role that is perhaps most important when the value of sterling is fluctuating wildly. The question now is whether its services will remain in demand now that the chaos in sterling brought about by last autumn’s ‘mini’ Budget’ has stabilised?
Initial signs point to yes. The company said that revenue for the three months to the end of March 2023 came in at £12.7mn, a 34 per cent increase on the corresponding three-month period last year. It should be noted that the company recently transitioned from a 31 March year end to a 31 December year end.
According to management, the group’s revenue mix has tended to be evenly divided between spot, meaning immediate, and forward trades. Last year, it introduced a ‘structured solutions’ division, which deals in options – derivatives that allow clients to hedge against currency volatility. Some 10 per cent of revenue was generated by this new business in Argentex’s nine-month reporting period. Argentex said that options generate higher margins than either spot or futures contracts. In the 12-month period to the end of December, the company also reported a 45 per cent increase in average revenue per customer, thanks in part to an increase in online trading by its clients.
Theshares currently trade at 14 times forward earnings for the current calendar year, which we think constitutes reasonable value for a company providing an increasingly essential financial service. Buy.
Last IC View: Buy, 120p, 8 Nov 2022
ARGENTEX (AGFX) | ||||
ORD PRICE: | 122p | MARKET VALUE: | £138mn | |
TOUCH: | 120-125p | 12-MONTH HIGH: | 142p | LOW: 68p |
DIVIDEND YIELD: | 1.8% | PE RATIO: | 20 | |
NET ASSET VALUE: | 34p | NET CASH: | £29mn |
Year to 31 Mar | Turnover (£mn) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
2021 | 28.1 | 7.40 | 5.20 | 2.00 |
2022 | 34.5 | 10.0 | 6.60 | 2.00 |
Year to 31 Dec (9-months) | Turnover (£mn) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
2022 | 41.0 | 7.80 | 6.20 | 2.25 |
% change | +19 | -22 | -6 | +13 |
Ex-div: | 29 Jun | |||
Payment: | 04 Aug | |||
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