Our opinion on the current state of FINBOND(FGL)

Finbond Group Ltd (FGL) is a company engaged in micro-lending and insurance operations, with a significant presence in both South Africa and the United States. The company has outlined ambitious plans to expand its operations in the US, aiming for 70% to 80% of its income to come from the American market within the next 3 to 5 years. As of the latest reports, Finbond already derives 66% of its income from the US, a market it views as having substantial growth potential.

Across both its operational regions, Finbond manages a total of 694 branches. For the six-month period ending on 31st August 2023, the company reported a notable increase in loans advanced by 23.2% and a significant rise in headline earnings per share (HEPS) by 72.4%. However, its net asset value (NAV) saw a slight decline of 2.6%, totaling R1.13 billion. The company attributes the growth in sales volumes to strong performance in both the South African and North American markets, surpassing both the previous corresponding period and the levels seen before the COVID-19 pandemic and regulatory changes in Illinois.

Looking ahead, in its trading statement for the fiscal year ending on 29th February 2024, Finbond projected that HEPS would increase by at least 20%, a turnaround from a loss of 15.1 cents in the previous period. This forecast indicates a positive trajectory for the company's earnings, despite previous financial setbacks.

From a technical perspective, Finbond's stock has been in a long-term downward trend and has only been drifting sideways since March 2022. Additionally, the trading volume is relatively low, with an average of about R117,000 worth of shares being traded daily. This low liquidity can pose challenges for investors looking to buy or sell large quantities of shares without impacting the price.

Given the company's ambitious expansion plans in the US and its significant income generation from that market, Finbond presents certain opportunities for investors interested in a financial services company with growing international exposure. However, the stock's historical performance, the ongoing downward trend, and its status as a penny stock suggest that it may carry higher risks compared to more stable investment options. Potential investors should consider these factors and possibly look for more robust opportunities, especially those seeking less volatility and higher liquidity in their investments.