OFX Group (formerly OzForex) has hit the skids lately, falling around 25% since it peaked at around $2.51 last month and 16% this week. Last month's high came shortly after the company’s annual meeting on 3 August, where it triumphantly reported how its systems had held together while others had struggled amid the violent currency swings caused by the UK’s Brexit referendum.
There’s nothing obvious to us that could justify the fall. Volatility has been low in its key currencies and the Aussie dollar has strengthened a bit. These things won’t help but they’re just short-term swings and roundabouts and hardly worth a 25% share price fall.
Then there’s the news that Commonwealth Bank has hooked up with Barclays in the UK to offer international payments via the latter’s Pingit app. Pingit is available UK-wide, even if users don’t have a Barclays account, and has around 3 million users. This was followed by comments from the RBA’s new governor Philip Lowe about the New Payments Platform, a collaboration between the RBA and the payments industry which is intended ‘to modernise key parts of our electronic payments system’. The platform will enable people to make instant payments between mobile phone numbers and email addresses, and should be available from late 2017. Of course this is intended for local transfers, but it might point the way for the future and may have contributed to investors’ concerns.
Banks, though, already provide international payments and they have done for centuries. There's more to doing this than just transferring money – they involve the purchase of currencies in the market, and what matters is whether the banks can give their customers access to this more efficiently than OFX Group. So far that hasn’t been the case, and there’s no obvious reason why that should suddenly change.
Competition from peer-to-peer payments providers, such as TransferWise, has also been increasing – even though trade suspensions at the height of the Brexit volatility highlighted some of their flaws. This will no doubt continue, but nothing appears to have changed in this regard over the past few weeks.
That said, sharp share price falls are sometimes more unnerving where there’s a lack of information, because it makes you wonder if there are others that know something you don’t. That may be the case here, particularly given that the company’s half-year ends in a week’s time. It also needs to be remembered that this is a speculative situation.
On that basis, we’re not minded to upgrade again at this point and we’re going to remove the price guide to avoid any confusion. We’ll provide a full update alongside the interim results in early November or earlier if new information comes to light. HOLD.
Note: The Intelligent Investor Growth and Equity Income portfolios own shares in OFX Group. You can find out about investing directly in Intelligent Investor and InvestSMART portfolios by clicking here.
Disclosure: The author owns shares in OFX Group.