The coronavirus pandemic has spread to all corners of the globe and punished stocks worldwide — but all hope isn’t lost as there are still opportunities for investors to find growth stories. One such example is OFX, an Australian-based online money transfer that has been operating since 1998.
What Is OFX?
OFX traces its roots to an information-only website created out of a garage in Sydney, Australia more than two decades ago. The founders came to realize they are sitting on a potential landmine of an idea: the global population wants to transfer money amongst each other in a fair and honest way.
The company has grown in size from two co-founders to more than 200 employees with offices across the world. So far, more than one million international money transfers were successfully conducted on the platform worth more than AUD $150 billion.
OFX boasts 1 million customers ranging from individual customers to large enterprises. The company is able to help transfer 55 global currencies from anyone to anyone, including friends, family, clients, payrolls, suppliers, and more.
OFX: Panic Buying Good For Business
There exists a direct correlation between growing demand for global money transfers and economic uncertainties, at least according to OFX. The company said in a recent statement that customers worldwide are scrambling to transfer cash to friends or families at a time when it might be physically impossible to do so because of closed borders or disruptions at physical banks.
OFX’s online platform offers an easy solution. The company acknowledged as much in its statement when it said: “uncertainty from COVID-19 has stimulated trading activity.”
OFX said it is seeing business momentum in both its Consumer and Corporate segments. As a result, management saw strong turnover and transaction volumes in the earlier stages of the global pandemic.
OFX is so confident in its recent momentum it can count itself among the rare global companies to reaffirm its prior full-year outlook. Even some of the largest global companies like McDonald’s are forced to tell investors they can’t accurately predict their financial outlook.
But in OFX’s case, management expects its full-year fiscal 2020 EBITDA to be between $36.8 million and $38.3 million. Even the low-end of management’s guidance range represents an improvement from 2019’s $32.2 million in EBITDA.
Get Paid To Wait
One of the main advantages of OFX’s stock is a very attractive dividend yield of nearly 5%. At a time when investors across the world are wondering if their dividend-paying stock will have sufficient cash to continue paying investors, OFX erased all concerns.
Even during a global pandemic, OFX expects to end 2020 with more than $56 million in net cash which should be more than enough to pay dividends.
OFX can use its leftover cash to do one of two things, or both. The company can heavily invest in its business to gain new market share if rivals aren’t seeing similar catalysts during these turbulent times. The company can also seek out accretive acquisitions that would give it a superior scale and a means to save money through synergies.
Both of these scenarios could generate long-term rewards for investors, but in the meantime investors will be paid to wait through a generous dividend.
OFX Isn’t A Big Bank, That’s A Good Thing
OFX competes against global banks and larger money transfer services like PayPal who are all much larger in size and scale. But OFX has one major advantage: it isn’t a global bank.
Millennials and other age groups started to turn away from big banks more than a decade ago. They were not happy with what transpired during the financial crisis as major banks worldwide were bailed out but individual people were kicked out of their homes.
This makes OFX an almost default go-to venue for new clients who are more likely to go out of their way and avoid doing business with Wall Street banks or those that dominate London’s skylines. Encouragingly, OFX actually offers better rates than banks and 80% of transactions are completed within one day.
Once converted to an OFX customer, the metrics are particularly impressive for investors. According to a 2019 presentation, 72% of all revenue is recurring in nature. The average Consumer client transacts six times over a three year period.
But management simultaneously has its eyes on targeting more lucrative client groups to maximize revenue. The average Corporate client transacts 40 times over three years with a lifetime revenue of eight times a Consumer. Most notably, an Enterprise client brings more than 180 times higher lifetime revenue compared to a Corporate client.
Conclusion: Near-Term Momentum For Long-Term Gains
The coronavirus pandemic could prove to be the beginning of a multi-year long growth period. As odd as it may seem, the best time to buy OFX’s stock is during these turmoil times — certainly not after as the company potentially surprises investors with spectacular earnings reports over the coming years.
