Rarely in the investment world is it possible to have your cake and eat it. Fortunately there are a few exceptions, including international e-payments and fintech platform Equals Money (EQLS).
As it revealed in its AGM statement today, it's combining impressive top line growth (+47% to £32.7m so far in 2023) with gross margin expansion (c. 50% from 48.3% in FY22).
Sales continue to be driven by higher revenues per day (+46% to £363k versus £248k last year), Solutions (+102% to £8.8m from £4.3m in 2022), and more customers reaping the rewards of using its bank-grade "straight through processing" technology.
It's true that the pace of expansion might be fractionally lower than the 54% YTD reported in its prelimnary results, which it released on 27th March. Yet the 47% is still significantly above my current year expectations of +28.4%, which materially derisks my FY23 turnover, adjusted EBITDA (pre SBPs) and EPS forecasts of £89.5m, £17.4m and 5.0p respectively (see chart).
Moreover, at 97p the stock trades on attractive EV/EBIT, PE and PEG multiples of 16.9x, 19.3x and 0.4x, which seems ungenerous for such as rapidly expanding business with positive operating leverage - and particularly when compared to my 160p a share valuation, and Zeus ’ and Canaccord Genuity’s respective target prices of 180p and 164p.
H1 2023 results are due out in the week commmencing 11th September, with a corresponding trading update in early July. And there’s a capital markets day scheduled in London tomorrow for institutional investors
Over the next couple of months, I would also hope to hear news that March's £4.1m all-stock acquisition of OONEX has been approved by the Belgium regulatory authorities. Once fully integrated, OONEX should enable the enlarged group to offer its best-in-class services right across Europe and in one fell swoop, expand the total addressable market by an order of magnitude.
Chairman Alan Hughes commented: “Based on the above, the Board remains confident in achieving expectations for the full year ending 31 December 2023.”