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TechFinancials raises earnings guidance

Here's a conundrum that maybe the company's own software can solve: the company raised earnings guidance, yet the stock fell
TechFinancials seeks to put retail investors on a level playing field with the pros

TechFinancials Inc (LON:TECH), the provider of financial trading services for retail customers, expects full-year group underlying earnings will be ahead of market expectations.

The second half of the year has seen more of the same for the creator of electronic trading platforms, which means the board therefore expects full year revenue to be in line with or marginally ahead of market expectations.

TechFinancials’ house broker Northland Capital Partners said the trading statement confirmed the continued turnaround of the business.

The business produced around US$$1.1mln of underlying earnings (EBITDA) in the first half of the year and Northland had been looking for full-year EBITDA of around US$1.6mln, “which given this morning’s statement looks underpinned”.

“The business produced a strong 1H16 performance, in particular in the trading platform business and it is highly encouraging to see the business continue to perform strongly in 2H16; the news should be well received by the market,” Northland speculated – incorrectly, as it happens.

“New product expansion (forex, CFD and mobile platforms) should continue to aid growth alongside the traditional options business,” the broker said.

The enterprise value, which essentially is the cost of acquiring the whole company (including debt obligations) is only 6.4 times projected EBITDA, which in Northland’s view represents an attractive entry point for investors not yet holding the shares.

Shares in the Israeli technology firm were down 1.5% at 16p. Northland has a price target of 27p for the shares.

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