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TechFinancials: THE INVESTMENT CASE

Techfinancials digs in while online trading markets settle

A bright spot was another good performance by consumer facing subsidiary DragonFinancials
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INVESTMENT OVERVIEW: TECH The Big Picture
Techfinancials believes clear regulatory guidelines will help its business

Binary options and other types of online trading have come under close scrutiny in a number of countries.

Platform software specialist TechFinancials PLC (LON:TECH) believes ultimately it will be a beneficiary of the moves by the regulators and sees strong protection of consumer interests as a good thing. 

The group says it works hard to maintain its competitive advantage by ensuring its trading platforms and solutions are regulatory compliant in all relevant jurisdictions.

Even so, the environment for online trading platform developers is uncertain at present and TechFinancials has been has been cutting costs and developing new products to adapt.

A simplified forex platform, mobile trading solutions and add-on CFD platform have already been introduced but the tightening up on binary options means a switch towards Forex and CFD products is likely to accelerate.

Fortunately, it also looks to have the financial strength to batten down until there is more clarity in the marketplace and the regulatory backdrop becomes more settled.

READ: Techfinancials to pick up US$1mln dividend from Asia subsidiary

Revenues dropped to US$6.97mln (US$9.86mln) in the half year to June, which also reflected a major blow as its largest B2B customer, 24option.com owner Richfield Capital, moved to an in-house system.

Core software licensing revenues totalled US$3.58mln (US$5.82mln), while trading platform revenues totalled US$3.77mn (US$4.47mln).

Interim group profits were US$282,000 (US$1.33mln) with cash at half year of US$5.8mln, the company said in a statement.

DragonFinancials the star

DragonFinancials was the stand-out performer. Turnover at the Hong Kong-based consumer-facing business rose by almost 10% to US$3.57mln while net profit climbed by 30% to US$2.06mln.

After the half year DragonFinancials also paid a dividend of US$2mln, of which TechFinancials received US$1.02mln pro-rata for its 51% stake.

READ: TechFinancials has significant financial buffer against current choppy market conditions

Diversification the plan

Asaf Lahav, group chief executive, said: "We anticipate the remainder of this financial year continuing to be challenging within the binary options market until there is clarity surrounding the on-going regulatory consultations.

“Nonetheless, we remain focused on diversifying our business in order to withstand these pressures and we have plans to introduce further products in the coming years.

"We are actively looking at potential projects that will leverage the company's technology and its expertise in online financial trading solutions and we will provide an update to our shareholders on our progress in due course."

At 6.9p, up 4% on the interim numbers, Techfinancials is valued at about £5mln.

What TechFinancials does

In a nutshell, it is a creator of electronic trading platforms.

Its business-to-business arm (B2B) provides software and back-up to brokers, enabling them to allow their customers to trade binary options, foreign exchange and certificates for deposit (CFDs).

The business-to-consumer division (B2C) includes the aforementioned DragonFinancials and is largely focused on binary options trading – a win or lose (hence “binary”) a fixed amount variant on traditional options.

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