£65 million into over £1 billion in just 7 years

This stock has potential to become our largest position...

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Someone found a way to turn £65 million into over £1 billion in just 7 years.

That's a 48% compound annual growth rate.

They took zero debt along the way.

They're generating 80% gross margins in an industry where 30% is considered exceptional.

A business that's been compounding revenue at 54.75% CAGR since going public.

This is the story of how a small team spotted an inefficiency in the world's largest financial market and built a money-printing machine that the big banks can't touch.

In 2024, this company processed over £25 billion in transactions.

Their clients include over 1,200 corporates and institutions across 50+ countries.

Yet they control less than 0.1% of their addressable market.

The founder still runs the company and owns over 13% of the shares. He's been at it for 15 years and shows no signs of slowing down.

But there's one more wrinkle that makes this opportunity particularly interesting.

The company generates substantial income from customer float - think Berkshire Hathaway's insurance float, but in a different wrapper.

They're sitting on £217.5 million in net cash. No debt. And they just announced their second £20 million share buyback program.

Pretty impressive for a business that was entirely self-funded until its IPO.

So, what's the deal?

Is this sustainable?

Can a company really maintain 40%+ returns on invested capital while growing at these rates?

Let's have a look at the numbers.

The Business

Alpha Group International (London: ALPH) is a fintech disruptor that's carved out a highly profitable niche by counter-positioning itself against traditional banks in the foreign exchange market.

Founded by Morgan Tillbrook in 2010, Alpha delivers specialized financial strategies and technologies to address complex financial challenges faced by corporates and institutions globally. The company went public in 2017 with a market cap of £65 million, which has since surged to over £1 billion.

The Business

Alpha Group International (London: ALPH) is a fintech disruptor that's carved out a highly profitable niche by counter-positioning itself against traditional banks in the foreign exchange market.

Founded by Morgan Tillbrook in 2010, Alpha delivers specialized financial strategies and technologies to address complex financial challenges faced by corporates and institutions globally. The company went public in 2017 with a market cap of £65 million, which has since surged to over £1 billion.

The Market Opportunity

To understand Alpha's opportunity, you need to understand the scale of the FX market. We're talking about $7.5 trillion in daily volume.

That's not a typo - trillion with a T.

Every single day.

This market has historically been dominated by the big banks - JP Morgan, Citi, Deutsche Bank, etc.

They've treated FX as a commodity product, focusing on volume over service.

Alpha saw the opportunity differently.

While banks chase the biggest deals and tightest spreads, Alpha focuses on the 99% of businesses that need actual help managing currency risk. These aren't companies looking to shave a basis point off a billion-dollar trade. They're manufacturers in Birmingham hedging their Euro exposure, or tech companies in Toronto managing USD revenues.

How the Business Works

Alpha operates through three main divisions:

1. Corporate Division (47% of revenue) This is the original business - helping companies hedge FX risk. But here's what makes it special: Alpha doesn't just execute trades.

They sit down with the CFO, understand the business, stress-test different scenarios, and design bespoke hedging programs.

Average revenue per client has grown from £66k to £71k in just two years. Client numbers increased 16% to 974. Do the math - that's £63.8 million in revenue growing at 21% annually.

2. Private Markets Division (51% of revenue) Launched to serve private equity firms, hedge funds, and other alternative asset managers. This division generated £69 million in 2024, up 20% year-over-year.

The killer app here is their Accounts & Payments solution. Alpha holds operational accounts for 7,100+ funds, up from 4,200 just two years ago. Each account generates fees plus that beautiful float income I mentioned earlier.

3. Cobase (2% of revenue) Their first acquisition, completed in December 2023. It's a treasury management platform that lets companies manage all their banking relationships through one portal.

Early days, but revenue is already up 70% year-over-year.

The Numbers That Matter

Here's where conventional analysis falls apart. Most analysts look at Alpha's "underlying" profit of £47 million and slap a fintech multiple on it. They're missing the forest for the trees.

The real story is in the unit economics:

• Gross Margins: 80% on the core FX business. When you include the 100% margin float income, blended margins push north of 90%.

• Customer Acquisition: Near-zero. Most new clients come from referrals. The sales team doesn't cold call - clients seek them out.

• Revenue Retention: Alpha doesn't disclose exact numbers, but client churn appears minimal. Once integrated into a company's treasury operations, switching costs are high.

• Operating Leverage: Front office productivity (revenue per employee) has increased despite adding 28% more staff. The platform scales beautifully.

Investment Thesis Deep Dive

1. Network Effects Creating an Unassailable Moat

The network effect in Alpha's business is more nuanced than a typical two-sided marketplace. Let me explain:

Traditional FX providers work on a spread model - they quote you a rate, execute with a bank at a better rate, and pocket the difference. It's a commodity business where the only differentiation is price.

Alpha flipped the model.

They charge transparent fees and pass through institutional rates. But to get those institutional rates, you need volume. To get volume, you need clients. To get clients, you need great rates. Chicken, meet egg.

Here's how they cracked it: They started with complex hedging strategies that banks wouldn't touch. While Barclays was happy to do a simple spot trade, they had no interest in designing a bespoke hedging program for a £50 million revenue manufacturer.

Too small, too complex, too much work.

Alpha made that their bread and butter. They'd spend weeks designing the perfect hedging strategy, charge a fair fee, and earn the client's entire FX wallet.

Do this 100 times and suddenly you have real volume. Real volume gets you better rates. Better rates let you compete for larger clients.

Fast forward 15 years and they're processing £25 billion annually. A new entrant would need to somehow replicate 15 years of relationship building while simultaneously convincing banks to extend them credit and competitive pricing.

Good luck with that.

2. The Float Story Nobody's Talking About

This is where it gets really interesting. Let me paint you a picture:

You're a private equity fund. You've got 17 portfolio companies across 8 countries. Each one needs operational accounts for payroll, suppliers, etc. You could open 100+ accounts across different banks, each with their own fees, FX rates, and reporting systems. Nightmare.

Or you use Alpha. One platform, competitive rates, consolidated reporting. Simple.

But here's the beautiful part - those operational accounts hold cash. Not investment cash, just working capital. Money waiting to pay next month's rent in Milan or last week's legal fees in Madrid.

Alpha aggregates all these small balances into one giant pool. In 2024, that pool averaged £2.15 billion. At current rates, that's generating £84 million in interest income.

The economics are absurd:

• Cost to service an account: Minimal (it's all automated)

• Revenue from account fees: £5-10k per year

• Revenue from float on balances: Often multiples of the account fee

• Margin: Essentially 100%

"We're not in the banking business. We're in the aggregation business."

The street completely misses this. They value Alpha like a traditional fintech - 15-20x earnings, maybe a premium for growth. But the float income changes everything. It's recurring, predictable, and scales with the business.

3. Geographic Expansion Just Getting Started

Alpha's international expansion follows what they call the "Alpha Academy" model, and it's brilliant in its simplicity.

Here's how it works:

Step 1: Test the market remotely. They'll have UK salespeople call on Dutch companies, see if there's demand.

Step 2: Once they hit critical mass (usually 10-20 clients), they'll send a veteran Alpha person to set up shop. Not some random local hire - someone who's been in the trenches and bleeds Alpha culture.

Step 3: That person hires 1-2 locals and trains them intensively. Six months of shadowing calls, learning the Alpha way. No shortcuts.

Step 4: Rinse and repeat until you've built a full local office.

They tried breaking this model once. In Canada, they hired a full local team without any Alpha DNA. Disaster. Revenue went nowhere, culture was off, clients noticed. They had to gut the entire operation and start over.

The new approach is working. International offices grew revenue 44% in 2024:

• Netherlands: +60%

• Spain: +55%

• Italy: +52%

• Germany: +48%

• Australia: +45%

And here's the kicker - they're only in 6 of 27 EU countries. They haven't touched Scandinavia. Eastern Europe is wide open. Asia remains untapped except for Australia.

If each new market can do even half of what the UK does, we're looking at 10x revenue potential from geographic expansion alone.

The Capital Allocation Story

This is where Alpha really shines. Most growth companies face a cruel trade-off: grow fast but burn cash, or generate cash but grow slowly.

Alpha does both.

In 2024, they generated enough free cash flow to fund all growth investments AND buy back £30 million in stock. No dilution, no debt, no financial engineering.

The capital allocation priorities are clear:

1. Organic Growth: Hiring salespeople, upgrading technology, expanding internationally. Every £1 invested here seems to generate £3-5 in revenue within 2-3 years.

2. M&A: But only deals that meet strict criteria - must add technology, customers, and products. Must be culturally compatible. Must be immediately accretive. The Cobase deal checked all boxes.

3. Buybacks: Trading at these multiples, buying back stock is a no-brainer. The company can retire 4-5% of shares annually at current prices.

4. Dividends: Token 0.5% yield. Honestly, they should scrap this and buy more stock, but UK investors love their dividends.

Why Now?

Three things make this particularly timely:

1. The Macro Hedge We're in a weird spot. If rates stay high, Alpha prints money on float. If rates drop and the economy booms, transaction volumes explode. They win either way.

2. The Institutional Shift Banks are retreating from "non-core" activities. Regulatory pressure, capital requirements, and low returns are forcing them to focus on the biggest clients. Alpha is perfectly positioned to capture the abandoned middle market.

3. The Complexity Dividend Brexit, supply chain reshoring, trade wars - the world is getting more complex, not less. Every new trade barrier creates FX risk that needs hedging. Alpha thrives on complexity.

Valuation Deep Dive

Let's get granular on valuation. The street sees this:

• Market Cap: £1 billion

• 2024 Revenue: £135.6 million

• "Underlying" EBITDA: £50 million

• Multiple: 20x EBITDA

Seems fair for a growing fintech, right? Wrong. They're using the wrong numbers.

Here's the real math:

Start with actual cash generation:

• Operating profit: £118 million

• Less: Real cash taxes (~£25 million)

• Less: Maintenance capex (~£3 million)

• Plus: Depreciation add-back (~£5 million)

• Free Cash Flow: £95 million

Now adjust for the balance sheet:

• Market Cap: £1 billion

• Less: Net cash (£217 million)

• Plus: Contingent earnouts (~£10 million)

• Enterprise Value: £793 million

The real multiple: 8.3x FCF

For a business growing 20%+ with 80% gross margins and massive reinvestment opportunities? That's absurdly cheap.

Run a simple DCF:

• Current FCF: £95 million

• Growth rate: 15% (conservative given 20%+ historical)

• Terminal multiple: 15x (market multiple)

• Discount rate: 10%

Intrinsic value: £1.8-2.0 billion

That's 80-100% upside from current levels.

The Acquisition Angle

Here's a thought experiment. You're the CEO of a major bank. Your FX division does £10 billion in revenue but margins are getting crushed. Regulatory pressure is mounting. Your best people keep leaving for fintechs.

You could:

• Invest billions rebuilding the technology

• Retrain thousands of relationship managers

• Hope clients stick around during the transition

Or you could buy Alpha for £2 billion and instantly own:

• Best-in-class technology

• 1,200+ sticky client relationships

• 500+ trained professionals

• 80% gross margins

The math is obvious. At some point, a big bank is going to make a move. JPMorgan, HSBC, BNP Paribas - any of them could write the check from petty cash.

Conclusion

Alpha represents a rare combination: a founder-led business with exceptional economics, a widening moat, and a massive runway for growth. The 13% insider ownership ensures management thinks like owners, not hired hands.

The company has reached an inflection point where it generates enough cash to fund growth without diluting shareholders. The recent share buybacks signal confidence in the business and a shareholder-friendly capital allocation framework.

But what really gets me excited is the optionality. Every new product, every new geography, every new client segment is a free option on massive upside. The core business is so profitable that they can afford to experiment.

Most importantly, Alpha has barely scratched the surface of a $7.5 trillion daily FX market. With less than 0.1% market share, the growth runway extends for decades.

This is the kind of business you buy and forget about for 10 years. When you check back, don't be surprised if it's a 10-bagger.

Risks

Let's be intellectually honest about what could go wrong:

Regulatory Changes: FX is lightly regulated today. That could change. New capital requirements or licensing regimes could hurt Alpha more than big banks.

Technology Disruption: Blockchain promises to revolutionize cross-border payments. So far it's been all promise, no delivery. But if someone cracks it, traditional FX could be disrupted.

Key Person Risk: Morgan Tillbrook IS Alpha. Yes, there's succession planning (new CEO just took over), but losing the founder-CEO is always risky.

Competition: The big banks are sleepy, not dead. If JPMorgan decided to really compete in this space, they have unlimited resources.

Macro Sensitivity: A prolonged recession would hurt. Less trade means less FX hedging. Though the float income provides some cushion.

Execution Risk: International expansion is hard. Culture doesn't always translate. What works in London might fail in Tokyo.

Valuation Risk: Sure, it looks cheap at 8x FCF. But if growth slows to 10%, suddenly that multiple makes sense.

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Disclaimer: The content provided in this newsletter is for informational purposes only and does not constitute financial, investment, or other professional advice. The opinions expressed here are those of the author and do not necessarily reflect the views of Schwar Capital. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The author may or may not hold positions in the stocks or other financial instruments mentioned. Always do your own research or consult with a qualified financial advisor before making any investment decisions.