Overall, OFX delivered a credible result in the context of a tough year for the company. While the combination of lower consumer active customers and COVID-19 led to lower active client numbers, the improved activity driven by corporate, enterprise and online sellers helped drive modest growth in turnover for FY21. Key features of the FY21 results were continued growth in the highly strategic North American market and robust revenue growth from Corporate and Online Sellers, with both delivering double digit revenue growth in FY21.
FY21 Key financial highlights
Performance by division
Consumer
Consumer revenue fell 16% but grew by 13% in H2 compared to H1. OFX noted that a number of key consumer use cases have been adversely impacted by COVID, such as holiday and travel and emigration / immigration, with an estimated net negative impact to revenue of $10m. Despite that, new North America revenue did increase by 7.7% in FY21. OFX expects the consumer segment to bounce back in FY22, but the pace of the recovery will be unclear. The consumer segment is expected to become a smaller proportion of NOI over time as OFX grows the Corporate and OLS segments.
Corporate
Corporate revenue grew 11% in FY21, with new revenue increasing by 30%. OFX launched Global Currency Accounts for Corporates in FY21 and saw 10% growth in new dealing clients. The company also provided more insight into the enterprise pipeline, which contains 40 prospects and is roughly evenly split by geography. Pleasingly, the company was recently appointed as an FX service provider to the ATO.
Online Sellers
OLS revenue increased by 11% in FY21 and grew by 36% excluding Asia. OFX delivered 24% active client growth and became an approved Amazon Payment Services Provider. OFX expects its OLS segment to benefit from the acceleration of e-commerce adoption driven by COVID in years to come.
Investment opinion
After a tough year that was significantly impacted by COVID, we are pleased to see continued growth in the key client segments of Corporate and Enterprise and Online Sellers. While growth in North America was softer than hoped for, the company did still deliver growth in this strategically important market. We were also pleased to note the announcement of the buyback, which we have been encouraging for some time now. Greater disclosure on the health of the enterprise pipeline was also noteworthy, in addition to the recent appointment as a service provider to the ATO. This win will serve as an important reference for other prospects, as well as being potentially meaningful financially to OFX. Additionally, the sustained growth in OLS and a turnaround in Consumer should support NOI growth in FY22 of more than 10%, and the company has committed to deliver operating leverage and therefore earnings growth. With a strong balance sheet and robust cash flow generation, we continue to believe that OFX is being materially undervalued by the market, trading at just 8.3x FY22 EBITDA.
OFX remains one of the cheapest companies in our Australian investment universe. We recommend investors stay in the vehicle as we look to extract an even better price outcome. However, we are cognisant of the need to provide a liquidity pathway for those investors who require it. For this reason, we will be opening Nanocap 8 for redemptions (on a best endeavours basis and following the redemption process set out below) for those investors who wish to exit the investment.
For those investors that wish to stay in the vehicle no action is required for the next 12 months.
The Microequities investment management team will remain fully invested in the Nanocap 8 investment vehicle and may decide to increase their investment during the next 12 months, as long as the Nanocap 8 remains open for investment. If fellow investors wish to increase their investment, they will be provided an equal opportunity to do so. Additionally, other investment vehicles managed by Microequities Asset Management Group may also invest or increase their investment in OFX Group.
Top-up Process
Redemption Process
In view of the limited liquidity in the shares held by Nanocap Trust No 8 (‘Shares’), the redemption process will operate on a best endeavours basis and follow the procedure below in order to be equitable to all unitholders:
To request a redemption please click below. Nanocap 8 investors that wish to redeem must send us an executed redemption form by close of business 31 May 2021. Investors that wish to stay invested in Nanocap 8 do not need to take any action.
Re-investment into Microequities other open Funds
If you wish to have your redemption proceeds reinvested into one of our open-ended funds, please click here. invest@microequities.com.au
If you have further questions regarding your Nanocap 8 investment or any other Microequities investment matter.
02 9009 2900.
Yours sincerely,
Microequities
Suite 3105 Level 31
Governor Macquarie Tower
1 Farrer Place Sydney NSW 2000
Phone: +61 2 9009 2900
E-mail: invest@microequities.com.au
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