IFX Group (IXF)

The recovery at IFX Group, enacted by its chief executive Edmond Warner, is finally bearing fruit. Yesterday, the foreign exchange trading and spread-betting firm said its profits for the year ending 31 March would come in at 3.4m, more than the 3.1m forecast by analysts. This performance represents a near doubling on the profits achieved by IFX in 2005.

Since Mr Warner took over in 2003 he has focused it on providing equity products, through Finspreads, and on foreign exchange. More recently he has opened an office in Shanghai offering spread-betting. Given the Chinese love of gambling, the potential market is huge.

Spread betting allows investors to take positions in the stock or foreign exchange markets. It enables punters to gear up their bets - that is, cash in on movements in valuations with only a small outlay of capital - and avoid paying tax on any profits they may make. The recent boom in the UK stock market has been particularly good news for Finspreads.

The IFX boss believes his work is now done and plans to quit this year. He will leave it with 19.5m of cash on its balance sheet, up from 16.8m last year, which accounts for about half the group's market capitalisation. Strip this out and the shares trade at just nine times forecast earnings for this year. This is a significant discount to the rating enjoyed by the quoted rivals IG Group and London Capital, which is unwarranted. Buy.

Article highlights the potential of IFX group in comparison to companies like IG Group and Capital spreads which trade on current per's of circa 19x-20x

http://www.thebusinessonline.com/Stories.aspx?The%20Spreadbetter&StoryID=DC16EABA-2798-4C43-BD18-DB76FAEA1E8B&SectionID=9A21BE85-0186-496A-9DFF-7C2F0883CFC3

The Spreadbetter
By Will Akerman
02 April 2006

SPREADBETTING has gone mainstream. What started 30 years ago as a vehicle for city traders to punt, has emerged as one of the most efficient ways of trading any financial instrument in the world. Why now?

Quite simply the success of early providers such as IG Index has in recent years led to a highly competitive marketplace of spreadbet companies offering tighter and tighter dealing prices and ultra-efficient services.

IG index de-listed in 2004 via a management buyout for 144m. The company returned to the market just 18 months later with a new price tag close to 450m at 120p per share. Some were scornful, with a handful boycotting the new issue in protest at the high valuation. The final judge on value is the marketplace, now trading at 208p with an implied market cap of 700m. Shares currently trade with a 19 times PE ratio. Critics have been silenced. A similar story on a smaller scale was Capital Spreads, listing in February this year with a market valuation close to 30m, shares jumped to value the business at 48m just eight weeks later.

Doubters are questioning the likelihood of fulfilling the high implied growth over the medium term, but I disagree. As chief executive of Easy2spreadbet Im regularly courted by would-be buyers of the business. Ive politely entertained bid approaches from as diverse a crowd as you could imagine. Although the company is not for sale, a string of meetings has allowed me an exclusive insight into the heart of industry.

So is a PE rating of near 20x a good reflection of reality? Without exception, growth in new business is coming from two areas. Firstly, markets such as Europe and Asia are providing a trickle of new business, which could turn into something more serious within a year. But the real growth is home-grown. The relentless and continued transition of investors from less efficient products such as CFDs and traditional share trading is sending account openings soaring.

From a customers perspective, access to markets as diversified as crude oil to Vodafone to interest rate futures, all from a margined trading account, is the holy grail of trading. Until recently wider dealing spreads forced active traders to consider CFD trading. No longer the case, spreadbet dealing charges are consistently lower, and the most seductive benefit profits are free from capital gains tax.

Quite simply, 20% annual growth is both real and sustainable, at least for the next 24 -36 months. Spreadbets are now the product of choice for everyone. Dont be surprised if in the next six months your local bank offers you a spreadbetting service next to your mortgage account.

Will Akerman, chief executive of Easy2spreadbet.com, is an active day trader

Based on panmures figures

Currently trading on 2006E on PE of 16x someway off the 20x of of IGG at present.

Sales, PBTA, EPS, DPS, PE
26.7, 3.5, 8.3, 1.5, 16.2

Looks like the re-rating is underway - or could it be a potential takeover candidate :)

A potential takeover target it was then :)

LONDON (Reuters) - Shares in financial trading and spread betting company IFX Group hit 4-year highs on Wednesday after rival City Index confirmed it had made an approach regarding a possible offer for IFX.

City Index said its initial approach on March 23 was rejected and that it was evaluating whether to make a further approach.

In a separate statement IFX said it was not currently in any discussions that might lead to an offer.

Shares in IFX were up 8.3 percent at 168 pence by 8:20 a.m., after peaking at 172-1/2 pence, valuing the group at around 48.5 million pounds.