MIDAS SHARE TIPS: Backing currency trader could start your cash rising

The foreign exchange market is the largest financial market in the world, with over £5.5 trillion of currency traded every day, far more than the stock and bond markets.

Many trades are purely speculative as banks and brokers bet on the direction of certain currencies. But currency markets are also an indispensable service for anyone who regularly works with customers or suppliers from abroad. Argentex is active in a specific part of this huge industry: catering to corporations, financial firms and the very wealthy, who want more than what their major banks offer.

The company floated on AIM in June 2019 at £1.06 and its share price had risen to over £1.60 by January 2020. Then the pandemic hit. Shares lost their way, the company had a few wobbly moments and the share fell below £1 earlier this year. But CEO Harry Adams used the covid crisis to strengthen his business and the results are starting to show. Sales are growing rapidly and the shares are now above the share price again, at £1.19. They need to keep gaining ground.

Adams founded Argentex in 2012. Then a 30-year-old currency trader in the City, he saw a gap in the market. Large multinationals could use top investment companies to meet their currency needs, while vacationers and small businesses could use large banks, post offices and exchange offices. Medium-sized companies were in trouble. They wanted more than traditional banks could give them, but were too small to matter to major currency specialists.

Fortunately for Adams, his currency clients included billionaire Sir John Beckwith. He supported Argentex from the start and his family office, Pacific Investments, remains a 14 percent shareholder. The investment has proven solid.

From nothing ten years ago, Argentex has almost 1,400 customers, including supermarkets, car manufacturers, oil producers – even flower importers and motorcycle manufacturers.

Many of these companies have complex foreign exchange needs. They can export to or import from different countries. They can buy goods from one part of the world and sell them to another part. They may want to set rates months or years in advance. Above all, they want to know that they are in good hands.

That is where Argentex comes into its own. The group takes a private banking approach to its clients and takes the time to understand their business so that they can provide tailored advice and service, no matter how complex or unusual the requirements.

Adams does not engage in speculative or proprietary trading. Instead, Argentex focuses purely on the current and future currency needs of the customer, minimizing exchange rate risks so that companies can plan ahead with greater confidence.

Business has been brisk. Last month, Adams announced a 75 per cent increase in sales to £27.4 million for the six months to 30 September. The company has now changed the end of the year to December and brokers expect annual revenue of £47m for 2022, alongside a profit of £9m.

Robust growth is forecast for 2023 and beyond, with earnings of £10.7m for next year and nearly £16m for 2024.

Argentex also pays a decent dividend, with 2.5 pence for this year, rising to 3 pence in 2023 and 3.5 pence the following year.

The city’s optimism partly reflects growing economic and financial uncertainty. When markets are difficult or volatile, companies are eager to remove as much currency risk as possible. But the uptick in Argentex’s fortunes also reflects some important changes the group has made over the past 18 months.

When Adams founded the company, he was joined by fellow currency trader Carl Jani and they developed the company together until Jani left in 2021. accelerated international expansion plans.

Both decisions paid off. Investments in IT have brought new customers and encouraged existing customers to do more with Argentex. In the six months to November alone, there was an 82 percent increase in the number of customers using the group’s online service, boding well for future growth.

Argentex has also opened in the Netherlands. Early signs are encouraging and there are now plans to expand – at a measured pace – across Europe.

Midas verdict: Foreign exchange is an essential part of business and Argentex helps to make the process smooth, efficient and cost-effective. But around 85 per cent of businesses still turn to banks for their foreign exchange needs, with transactions amounting to billions of pounds in the UK alone.

Adams is determined to change the dominance of banks in the market, aiming to provide better service and more competitive pricing than traditional players. As a 12 per cent shareholder, he is highly motivated to succeed, while the board of directors provides further reassurance, chaired by corporate veteran Digby Jones, former director-general of the CBI and staunch defender of British business interests.

The shares, at £1.19, should go a long way. And the dividend adds an attractive perk.

Traded on: GOAL Ticker: AGFX Contact: argentex.com or 0203772 0300