CURN - Greystone Capital - Currency Exchange Intl: Opportunity Set Not Being Appreciated By The Market
2023-07-31 13:20:00 ET
Summary
- Currency Exchange International generates revenue through foreign currency exchange services for individuals and financial institutions.
- The company's Banknotes and Payments segments are expected to drive strong earnings growth.
- The Exchange Bank of Canada, a key asset for Currency Exchange, has the potential to capture a significant portion of the market, leading to substantial revenue growth.
The following segment was excerpted from this fund letter.
Currency Exchange International
( OTCPK:CURN )
Currency Exchange is our provider of foreign currency exchange services. The company generates revenue by sourcing foreign currency for both individuals and financial institutions through their Banknotes segment, as well as facilitating international payments for financial institutions via their Payments segment. CURN also has a retail business via partnership agreements located inside of high traffic airports, as well as an online delivery service for foreign currencies in 40 states. We are currently in the midst of the all-important travel season for the business, where data is skewing positive, and I’d expect the company to report strong quarterly results in September.
We are interested in the longer-term picture, however, and not included in my last letter was my attendance at the company’s annual meeting in March with a lot of positive takeaways. Management and the Board seem to grasp the opportunity set in front of them and are doing their part to execute with vigor. Banknotes and Payments are chugging along and should provide enough growth and operating leverage to power strong earnings growth moving forward.
Outside of Payments, The Exchange Bank of Canada (within Banknotes) where Currency Exchange is one of only three banks able to source US dollars from the Federal Reserve, may become CURN’s crown jewel asset over time. There are significant competitive shifts taking place throughout the industry among CURN’s larger competitors that favor the company, and I believe the opportunity set both internationally and within Banknotes is not being appreciated by the market. Almost as a footnote, and something I’m pushing the company to communicate, was management’s comment at the annual meeting regarding the size of the opportunity for Exchange Bank of Canada being in the neighborhood of $400mm annually. Management thinks they can capture 20% of this market over time, which would result in incremental revenues that would eclipse the current run rate for the entire business. With similar operating leverage that we’ve seen in Banknotes, (staffing and compliance costs would be behind them at this point), the operating income numbers would start to look silly.
CURN is in the process of making investments to continue building out these capabilities, and I’m excited to see them bear fruit beginning in 2024. I think it’s only a matter of time before the market recognizes the company’s strong competitive position as well as earnings potential. The road will not be a smooth one, but CURN remains on track to double earnings within the next few years and as such the business remains firmly among our top five positions.
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Greystone Capital - Currency Exchange Intl: Opportunity Set Not Being Appreciated By The Market