As everyone knows, smallcap investing is definitely not for widows and orphans. However, in order to improve the odds, it is crucial to have a disciplined and structured approach when stock picking. For me, this involves assessing four key factors: Company, Industry, Price vs Value, and Management.
Here, B2B international payments and forex services firm Argentex Group (AGFX) ticks all the boxes, especially the 4th where I have always rated CEO Jim Ormonde as top notch.
That said, 12 months ago I was highly sceptical of Board's decision to build its own in-house straight-through processing forex platform (AGP) rather than simply buying an off-the-shelf system from a 3rd party.
Fortunately, it appears my concerns were unfounded, as the AGFX engine is beginning to fire on most of its cylinders - albeit vs conservative expectations.
In fact, today after posting better-than-expected FY'24 results, the Board has upgraded guidance, with house broker Singer Capital Markets hiking their adjusted FY25 EBITDA forecast from £1.7m to £4.5m on sales up 5% to £52.8m vs £50.3m LY.
In terms of the balance sheet too, there was net cash of £18.4m as at Dec'24, equivalent to a 'ballpark' headroom of £5m (my guess) that is freely available to Argentex after deducting regulatory requirements.
Sure, going forward, there will still be a temporary drag on performance due to ongoing investments in overseas expansion, new products, and the forex IT platform (AGP) which is slated to go live in the summer.
Yet equally, if you are a risk tolerant investor like myself with long-term time horizons, then I can see AGFX more than doubling over the next 12-24 months.
My target price is 88p/share vs Singer Capital Markets at 70p.
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