Equals Group (EQLS FOLLOW) has partnered with Tap Global Limited (“Tap”) to provide crypto currency exchange services to both its B2B and B2C customer bases.

The technology-led international payments group focused on the SME marketplace aims to provide multiple payment services across all currencies in ‘a simple, accessible platform. ‘

Historically, available currencies have been limited to government-backed ‘Fiat’ currencies, however, Equals will now enable its customers to trade in and out of crypto currencies vs fiat currencies in response to the increasing recent adoption of crypto as an asset class.

Tap Global, which is a Gibraltar-registered firm fully regulated by the Gibraltar Financial Services Commission that holds the ‘distributed ledger technology’ licence, will be Equals’ first partner in this space.

The agreement will initially be on a referral basis, allowing the Group’s customer base to interact directly with Tap. In the near future Equals said it plans to ‘enhance the connectivity of its independent platforms, leading to an enhanced and seamless customer experience.’

This latest capability created for Equals’ customers is intended to become part of a wider strategy which would include crypto and decentralised finance (“DeFi”) for the Company. 

“Equals exists to make cross-currency payments easier and cheaper for its customers whilst adhering to the highest levels of compliance and risk control, said CEO, Ian Strafford Taylor.

He added, “It is now a logical step for the Group to add a capability to allow our clients to convert into and out of crypto currencies against the fiat currencies. The tie-up with Tap, a regulated and well-accredited partner, allows us to offer just such a service, which provides crypto currency liquidity.”

This partnership comes as cryptocurrencies such as Bitcoin is becoming increasingly adopted by international banks, payment providers & corporations, including JP Morgan, BNY Mellon, PayPal, Square, Tesla & MicroStrategy, alongside high-profile asset managers such as Paul Tudor Jones, and Guggenheim Partners. Looking ahead, and assuming the increasing utility and popularity of Bitcoin and other crypto currencies increases, this partnership could translate into a major incremental revenue stream for Equals Money. Shares in the stock were trading 7.24% higher this morning at 40.75p following the news.

EQLS price chart

Reasons to Follow Equals

EQUALS is an international payment services provider to the retail and corporate segments of the UK market, which combined is estimated to be worth £60bn a year. 

The cloud-based peer-to-peer payments platform is widely regarded in the industry as ‘best-in-class’ enabling personal and business customers to make low-cost multi-currency payments across a range of FX products, all via one integrated system.  
 
The FairFX platform facilitates payments either directly to Bank Accounts or at 30 million merchants and over 1 million ATM’s in a broad range of countries globally via Mobile apps, the Internet, SMS, wire transfer and Mastercard/VISA debit cards.  

Successful Acquisition Strategy

In recent weeks, Equals said it is ‘increasingly being approached by other international payments businesses’ and highlighted that it will continue to selectively acquire companies. 
 
Last month, Equals acquired certain assets from the international payments business of Effective FX (EFX) for a consideration of £1.6m, to be satisfied from existing cash resources.  
 
The ‘earnings enhancing acquisition’ primarily comprises the purchase of EFX’s client book of more than 200 corporate clients, from a wide range of industries, which generated adjusted EBITDA of approximately £0.5 million for the 12-month period to 31 August 2020.  
 
Equals said the acquisition showed the continuing growth of the Group in B2B international payments via its three routes to market: ‘firstly, directly to its own customers; secondly, via its Equals connect B2B2B strategy; and thirdly, via the acquisition of compatible businesses.’ 
 
CEO, Ian Strafford-Taylor, said the acquisition highlighted Equals’ key strengths in the B2B international payments arena; its openness to M&A opportunities, its versatility in acquiring volumes and revenues, and the strength of its payment’s infrastructure and technology.

Positive Trading

In a trading statement released in January 2021, Equals said it had significantly reduced its cost base leading to both cash break-even and an increased cash position of £8 million. 

This comes in ‘comfortably ahead of market expectations’, it noted, with current market expectations for adjusted EBITDA averaging £0.55m with net cash averaging £6.75m FY20.

The figures stated in this previous announcement are unaudited and the Company told investors that it expects to report its audited financial statements in early April 2021.

Compelling Buy-Side Valuation

Recent research from PMH Capital has confirmed Equals is expected to grow at approximately 16% in FY21e, which is above the average growth rate of 12% for the Fintech and e-payments segment of the Technology sector.

Based on these assumptions, the current valuation for the company appears extremely compelling on a forward FY21e EV/Sales multiple of approximately 1.2x versus 6.9x for its peers.

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