OFX - OFX Group

[McLovin]

Re: OFX - OzForex Group

They talked a pretty big game yesterday, and if it pays off then they'll do well but 12% just for bringing out a plan and a nice new logo?

 

[notting]

Re: OFX - OzForex Group

Impacts of the
Accelerate Strategy

• Extra $20m costs over 24 months in FY17 and FY18
• ½ Capex / ½ Opex
• Revenue will grow faster than expenses
• Earnings will grow faster than revenue
• Double revenue in 3 years

The recent sell off largely revolved around marketing spending versus resulting revenue generated as the attempted to grasp a share of the US, which looked desperate.
I think the above presentation slide suggested that will be turned around.
I sold half mine today.

 

[prawn_86]

Re: OFX - OzForex Group

How expensive is expensive? Are we talking $1m, $10m, $100m?

Always good to get insights from someone in the industry.

Im not on the operational side so dont have clear figures. But i would estimate to set up a shop, in Australia alone, you would need at least $5m to pay for infrastructure, licensing, margin holdings, staff, drawdowns while ramping up etc and then you wouldnt have a competitive advantage because you would likely need to use corespondent banks (more fees) and not get good credit lines from your banking partners

To set up a truly global operation? No idea, i would say at least 50m

 

[George Washingto]

Re: OFX - OzForex Group

A couple of questions...

1) Per your blog, OFX's biggest competitive advantage is first mover advantage and the "stickiness" of their customers. OK, I accept that, to a point, but then in your valuation you say...



How much will this growth cost? OFX may have sticky customers but to continue to grow they need to acquire new customers. They have zero competitive advantage, and, from what I've seen, the market for FX broking is very crowded.

2)



Hmm...Do they really? What attributes do these assets have that make them difficult to replicate? I see a very small asset base, and let's face it there's nothing novel about buying and selling fx. It doesn't seem difficult at all to replicate, and those margins sure to give competitors a pretty juicy reason to.

Thanks for the responses McLovin. I agree, my biggest issue with this investment is the shallow moat. It's no Sydney Airport, but everything comes at a price I guess. Also, it has taken OFX 15 years to get to where it is now. I think Prawn has covered it better but my understanding is it isn't that simple to just put up another website and start offering the same service. To get the scale required to operate profitably I imagine any new entrant would have to run at a loss for a long period of time.

In regards to paying for growth, OFX already pays ~15% of revenues in marketing/promotion. My rudimentary FCF valuation factors that in going forward. What is really interesting is the operational leverage of this business. Each additional customer would fall straight to the bottom line. The incremental costs of serving additional customers would be pretty close to zero I imagine.

Regarding the AGM, its always nice to get lucky. If only every stock took off 20% after I bought it. Looks less attractive now but happy to hold. I see this delivering a nice stream of increasing dividends for the next 5-10 years.

 

[prawn_86]

Re: OFX - OzForex Group

What is really interesting is the operational leverage of this business. Each additional customer would fall straight to the bottom line. The incremental costs of serving additional customers would be pretty close to zero I imagine.

Really depends on their sales structure and what sort of account. For a private account that signs up online and does small transfers then yes you are correct. However that (generally) isn't where the money is.

For a good corporate level client i would say a 'dealer' can manage no more than 200 clients without efficiency losses. The on the corp side there is more and more competition in Aus (banks are pushing back aggressively).

So yes, if they want to play in the small personal 'transfer' space you are correct, although one has to question the total market size of this especially in Aus. For corporate clients you will need to bring on more people as the corporate book grows in order to manage and defend those clients

 

[prawn_86]

Re: OFX - OzForex Group

Prelim takeover bid by Western Union today. WUBS has a history of screwing up acquisitions from the client perspective, so will be interesting how this goes through in the mid term, but as licensing and compliance gets more difficult and costly you are likely to see 2 things:

1. Further consolidation among non bank players (not that there are a lot out there left). WUBS only tends to 'grow' via acquisition and then blows all the benefits anyway

2. Unregulated blockchain players coming into the market, whether they can get enough corporate and mass market acceptance to go legit depsite licensing (a la Uber) remains to be seen

 

[George Washingto]

Re: OFX - OzForex Group

Prelim takeover bid by Western Union today. WUBS has a history of screwing up acquisitions from the client perspective, so will be interesting how this goes through in the mid term, but as licensing and compliance gets more difficult and costly you are likely to see 2 things:

1. Further consolidation among non bank players (not that there are a lot out there left). WUBS only tends to 'grow' via acquisition and then blows all the benefits anyway

2. Unregulated blockchain players coming into the market, whether they can get enough corporate and mass market acceptance to go legit depsite licensing (a la Uber) remains to be seen

Well this has been a rollercoaster. Since my original post it has gone from $2 to $3.60 and now all the way back to $1.90.

Putting my very long term hat on, it could turn out to be a blessing a ~$3.60 takeover fell through. Interested to get people's thoughts on WU's motives... strange to do 3 months of DD for no result. Sounds to me like there might be some brinkmanship going on. OFX calling WU's bluff perhaps, or maybe WU calling OFX's bluff!

Still holding..

 

[skc]

Re: OFX - OzForex Group

Well this has been a rollercoaster. Since my original post it has gone from $2 to $3.60 and now all the way back to $1.90.

Putting my very long term hat on, it could turn out to be a blessing a ~$3.60 takeover fell through. Interested to get people's thoughts on WU's motives... strange to do 3 months of DD for no result. Sounds to me like there might be some brinkmanship going on. OFX calling WU's bluff perhaps, or maybe WU calling OFX's bluff!

Still holding..

OFX coupled a profit downgrade with the end of the talks which would have explained a lot of the falls. It was trading @ $2.60 before the indicative offer... so the current price is just 30% below that price. Considering the profit downgrade and a week market particularly at the high PE end, the current share price feels about right (plus/minus 15%).

 

[notting]

Re: OFX - OzForex Group

It's not often a good sign when someone pulls out of an offer after spending money on due diligence after spending on a take over offer.

 

[System]

On September 2nd, 2016, OzForex Group Limited changed its name to OFX Group Limited.

 

[Dona Ferentes]

wow, 8 years

undone all the good work for the year, from $2.25 to $1.20 on Thursday and a slight recovery to $1.40

1H25 Update
For the six months ended 30 September 2024, OFX expects to deliver NOI of approximately $111m and underlying EBITDA of approximately $29m (subject to auditor review). This outcome is lower than anticipated, and reflects the following factors, which relate to the key assumptions for FY25:
• Trading through the first few months of 1H25 was in line with expectations as the near-term economic environment showed some positive improvements.
• However, later than anticipated shifts in the interest rate cycle, and corresponding range-bound key currency corridors as a result of the strong USD, resulted in a slower rebound in Corporate confidence. This inhibited client trading patterns late in the half, especially in September, resulting in lower than expected Fee and Trading income.
• Unusually, Corporate ATVs in the UK were down 21.8% on the prior corresponding period and Canada were down 7.1% on PCP, which drove lower revenue on PCP. In Australia and the US, Corporate ATVs were mixed, however, higher transaction volumes resulted in double digit growth in Corporate revenue on PCP in each geography.
• Pleasingly, new Corporate clients are performing well, with Corporate new revenue up 11% on PCP from FX only. In Australia, where the New Client Platform (NCP) was launched in June, Corporate FX-only new revenue growth is 25% on PCP, and up 38% including non-FX activity.
• While OFX’s core resources are focused on B2B growth, Consumer confidence in most geographies remained subdued, which, along with historically low levels of volatility, resulted in lower transaction volumes overall but especially in Australia. Excluding Australia, Consumer revenue was flat on PCP but grew 9.2% versus 2H24.