Transaction Ltd: Exposure To Enormous Growth In India
Get More Commentary, Discussion & Market Information On -
What is your edge? Just like professional athletes, us traders need to know what our strengths are and play towards these. Rafaal Nadal has a wicked forehand and Rodger Federer one of the best backhands in the history of tennis. They work each game towards their strength and go for the winning shot when the set-up is right. They don’t continuously try and attempt low probability shots early in a rally just to win a quick point nor do they go for extravagant strokes that lead to unforced errors. These are characteristics of players outside the top 10 in the world and why these two players have been ranked number one.
That’s why statistics are crucial in identifying our strengths as traders and I have mentioned it before, keeping an excel ledger of all your trades will able to help identify where you make money consistently and where you lose. My stats show that I am pretty useless at trading FX. Hence, why I do less than a dozen FX trades a year. It’s a market that mean reverts and contains a lot of volatility and ”noise” that distracts away from the underlying fundamentals. By removing weaknesses (areas of consistent trading losses) also helps amplifying the strengths (trading profits).
Where my strength is though, is in identifying mid and small-cap companies that have an exceptional fundamental story behind them and timing it well. This can be based on either a bottom-up company specific story or a widespread macro-themed sector re-rating like the lithium sector of late. More than two-thirds of my profits come from trading these stocks across the globe and I focus a lot of time in identifying such opportunities.
SMN and EMC are the two that I have focused on the most and now Transaction Ltd (TSN) has begun to gather my attention for it is difficult to find pure investment plays exposed directly to rapidly growing Indian economy.
TSN is building the largest ATM and payments network in India. India is the world’s fastest growing consumer driven market and the demand for suitable payments infrastructure is skyrocketing. The numbers on India are truly staggering. Over a million people join the workforce every month and their workforce now comprises of nearly 500 million people. By 2030 India is expected to have 28% of the world’s workforce growing to a billion people. The Indian middle class is expected to be larger than the entire US population (585 million people) by 2025.
I can continue to rollout the numbers but it is more effective if I show some slides below from the TSN presentation showing these statistics. But first, TSN owns 24.89% of TSi India a privately owned entity that is rolling out this ATM and e-payments network and are currently negotiating to purchase the remaining shareholding to move to full ownership. Thus the recent capital raising and any announcement on this should see the stock gap higher. Recent share price activity suggests progress could be moving along well.
Now back to these mind blowing stats.
So we know the numbers are big, the opportunity if executed will be rewarding but what about the share price. At the end of the day, without an improving share price performance there is no capacity to profit. Crucially, the share price has been able to rally the past few days, ending the stag from its capital raising and starting what should be the beginnings of the next uptrend. Volumes have also picked up with technical indicators lending their support across daily and weekly timeframes. This all points to a greater level of longevity to the rally rather than just a fleeting moment in the spotlight.
The real potential comes from the below weekly chart where the rally from 0.03c to 4c could be retreated in what is known as a measured move in technical circles. That would easily see levels through to fresh new highs with targets as high as 5.5c. For such levels to be attainable in the medium-term TSN would need to be successful in obtaining full ownership of TSi – but the opportunity is significant enough that is worth the risk now.
Greg is the Head of Proprietary Trading at Global Prime and has over 20 years of experience as proprietary trader and high level strategist for the major investment banks including Citigroup, Bankers Trust and Macquarie Bank. He has been involved across all asset classes including commodities, bonds, currencies and equities right across the globe.
After a 10-year career within the comforts of the large investment banks and research firms he branched out on his own to form his own proprietary trading firm successfully building the business into a multi-million dollar trading operation that turned over a billion dollars a year. This same team now runs the proprietary trading desk at Global Prime, risking their own money in line with the firm's and client's capital.
Greg has appeared on CNBC, Channel 9 - Business Sunday programme, a guest columnist for the Australian Financial Review, a regular author for Personal Investor, Wealth Creator and Shares magazine and is the former Treasurer of the Australian Technical Analysts Association.