SeeThruEquity Initiates Coverage on LongFin Corp. with a Price Target of $8.42NEW YORK, NY / ACCESSWIRE / September 7, 2017 / SeeThruEquity, a leading independent equity research and corporate access firm focused on small-cap and micro-cap public companies, today announced it has initiated coverage on LongFin Corp., with a 12-month price target of US $8.42.
The report is available here: Longfin Initiation Report.
We initiate coverage on LongFin Corp. (Nasdaq pending, "LFIN") with a price target of $8.42. LongFin is a non-banking Fintech company providing structured commodity trade finance (shadow banking) solutions. The company also provides market making (FX, FX derivatives, commodities) and liquidity to global exchanges, banks, and trading houses, via its proprietary electronic platform powered by artificial intelligence and machine learning. Regular research and development of new electronic market making (EMM) products (such as TradeFlow platform) and geographical expansion via banking channels and new fortune 500 global trade companies bodes well for the company. LongFin aims to connect 70 FX and spot exchanges and more than 300 banks across the globe via its platform. The company's EMM trading platform is highly reliable, scalable and can integrate directly with exchanges and other liquidity providers. The size of shadow banking industry stood at ~$34 trillion in 2015 and is expected to grow further as global trade financing gap continues to increase. We see LongFin as a speculative play on a multi-trillion-dollar shadow banking industry with a proprietary electronic platform and an experienced management team. The company is witnessing rapid growth with revenues which are expected to reach ~$2.4 billion by 2022. The EBITDA margins are likely to remain in the range of 6-6.5% for a majority of the forecast period.
Proprietary EMM Technology Powered by AI/Machine Learning
LongFin's proprietary electronic market making (EMM) platform offers ultra-low latency, wide connectivity and is powered by artificial intelligence and machine learning algorithms which provide the most efficient order management and execution. The platform can perform over 2500 transactions per second with less than 3-4 ms of execution latency. It is co-located with exchanges and provides directs streaming from banks.
EMM is a part of Automation of Knowledge Work which is ranked second to Mobile Internet by McKinsey report out of 12 disruptive technologies. The company's EMM trading platform is highly reliable, scalable and can integrate directly with exchanges and other liquidity providers. LongFin aims to connect 70 FX and spot exchanges and more than 300 banks across the globe via its platform.
Multi-Trillion Dollar Global Trade Finance Market
Global Trade Flows are continuously increasing across geographies, thus creating a large gap between trade flows and financing facilities. The global market for trade finance was estimated at $6.5-$8 trillion in 2014 according to the Bank for International Settlements. As of 2015, the global trade finance gap which reflects the inability of financial institutions to provide trade finance is estimated at around $1.6 trillion. About $692 billion of this is in Asia (including India and China). This provides a large opportunity for non-bank intermediaries such as LongFin to cater to the shortfall.
Rise of Non-Bank Liquidity Providers
The non-bank liquidity and technology solutions providers, specifically in the FX market, has seen tremendous growth post the financial crisis. In 2015, non-bank liquidity providers handled 20% of the overall global FX trade, up from 16% in 2014. This number is likely to move in the range of 30-35% in the coming years. FX markets are perfectly suited for non-bank liquidity providers, particularly principal trading firms as they are standard, liquid, electronic, and boast daily turnover in trillions of dollars. The global spot FX size is $5 trillion / day and global trade hedging is more than $60 trillion. Over the past few years, there has been a shift in the mix of client execution towards multi dealer platforms (MDPs) such as LongFin. Since 2008, flow handled by MDPs has jumped 32%, while phone-traded volume is down 50%. The company handled ~$17.5 billion in FX transactions during 2016-17.
Initiate Coverage with a Price Target of $8.42