More to come from Fonix Media

Mobile payments and messaging services company Fonix Mobile (LON: FNX) has been quoted for more than three months and there has been an upward trend to the share price.

London-based Fonix was founded in 2006. Last October, shareholders in Fonix raised £45min a placing at 90p a share. The company did not raise any cash. Clients include Bauer Media, BBC, ITV and BT and it has a good track record of hanging onto these clients.

The cash figure in the balance sheet appears high but that is due to the payments going through Fonix. That is why creditors tend to exceed debtors – depending on the timing of events. For example, there was net cash of £28.6m on the 2019-20 balance sheet, but the underlying net cash is £2.3m.  

Current trading

In the six months to December 2020, total payment value increased by 18% to £123m, while gross profit was 21% higher at £5.8m. That is more than 50% of the forecast for the full year, so there is potential for an upgrade if the momentum continues.

Fonix has developed its own platform and each transaction it handles generates a small percentage commission for the company and part of this income goes on fees paid to the telecoms carrier. Operating expenses will increase over the next couple of years, partly due to the costs of being quoted, but revenue growth should more than compensate for that.  

Full year pre-tax profit is expected to increase from £7.3m to £8.2m, rising further to £9.1m next year.

Valuation  

Even though the share price has risen by 51% since he flotation, the rating is still much lower than rival AIM-quoted mobile payments company Boku, although Fonix is not growing its earnings as rapidly.

On top of this, Fonix offers a dividend. It is set to announce a maiden interim dividend in March. The full year dividend is estimated at 5.1p a share.

Fonix has been growing faster than its market and there is plenty of potential for the share price to go higher.