Currency Exchange International: Expected Price Increase, Adding Clients Rapidly, And Additional Catalyst To Grow Operating Profit

| About: Currency Exchange (CURN)

Summary

Incredibly sticky B-to-B technology and logistics company worth ~$40 CAD per share.

Just announced a 15% increase in client locations.

Trading at 8.6x 2016E EBITDA, a ~16x 2016E EPS multiple, and a 6.5% FCF yield.

Owner operator CEO who built the business and owns ~22% today.

Potential for near-term pop based on OSFI "Banker's Bank" approval (see last conference call for details).

Currency Exchange International (TSE:CXI) (OTCPK:CURN) keeps on trucking. Today the company announced tremendous growth in the last few months and there is a high likelihood of CXI receiving their "Banker's Bank" approval in short order. Currency Exchange International is easily worth $40 and has multiple near-term catalysts coming through the pipe.

The company is already well explained in colleague Ariana Research's write-up so my comments will focus on what is new.

  • Wholesale customer locations have grown 103% pro forma today's news release and cash flow & earnings are primed to follow. The company shows no signs of stopping their growth over the intermediate term.
  • The market has sold CXI off from ~$37 CAD per share to ~$20 given a lull in growth as the company focused on prepping for the banker's bank approval. CXI is not going to be a tradition bank which takes deposits and makes loans - being a regulated bank in Canada will give them access to the Bank of Canada window to acquire there inventory (paper currency) for much less cost. We anticipate this increases operating profit and EBITDA by 15% to 20% overnight upon approval.
  • Investors should expect a re-acceleration of the company growth to 30%+ CAGRs when the bankers bank is approved. Why? The answer is simply one of compliance. CXI's customer banks have massive internal and external compliance pressures and CEFIX (Currency Exchange technology system) is superb. Yet, Currency Exchange itself is regulated as a money service business currently and will be regulated as a bank shortly. This will fulfill larger and larger banks compliance checklists and enable CEO Randolph Pinna to continue to capture massive market share.

While the stock is thinly traded, the intrinsic value is easily $40 per share (~2x today's price), investors are investing in a rapidly growing business at bargain basement prices, and getting to invest alongside a tremendous owner operator who owns 22% of the business.

Disclosure: I am/we are long TSX:CXI.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.