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Argentex eyes expansion as it cashes in from rising foreign exchange demand

Snapshot

The corporate forex firm doubled its operating profit and booked a third more clients in the last six months, saying political uncertainty in UK increases demand for currency exchange

Argentex -

Quick facts: Argentex

Price: 185.5 GBX

AIM:AGFX
Market: AIM
Market Cap: £206.6 m
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What it does

Argentex Group PLC (LON:AGFX) specialises in providing corporate foreign exchange for institutions, corporates and high net worth private individuals.

How it’s doing

The foreign exchange services provider, which made its AIM debut with a £12mln June fundraising, said in November its outlook was “strong”.

Revenues for the six months to 30 September coming in at £13mln, up 32% compared to the same period last year thanks to the company signing up 210 new corporate clients, taking the total to 932.

Meanwhile, operating profit doubled to £8mln and cash at the end of the period was £32mln.

Argentex is now looking to double the number of its frontline sales staff over the coming eighteen months to cope with growing demand for its services.

“We have barely a fraction of a market worth hundreds of billions of pounds,” said Carl Jani, co-chief executive.

"’How can we get more?’ is the question we ask ourselves every morning.”

Argentex added the current political uncertainty in the UK should be positive for the business, as pressure on sterling brings benefits for those who export from the UK or are pouring overseas revenues into British bank accounts.

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What the boss says

Co-chief executive Harry Adams said that opportunities for the firm are opening up: “We’re seeing that 85% of corporates still trade using their bank for foreign exchange, so the market is absolutely huge.”

What the broker says

Numis put a 'hold' recommendation on the stock and target price of 162p in November.

The broker said Argentex, which supplies foreign exchange services to small and medium-sized enterprises, is a “very high margin business", with an operating margin of 46%.

"Its ROAE (return on average equity) is 76% which is the highest ROE of any of the balance sheet businesses that we cover. Unlike most of the rest of the sector, Argentex has almost no market or macro risk.”

Numis also pointed out that Argentex is very well diversified by customer and geography, and has "little regulatory risk compared to the rest of the sector”.

"We also see potential for international trades to grow", the broker added, as Argentex currently generates 72% of its revenue from UK clients, with the other 28% coming from the rest of the world.
 

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