Charles Savage says Purple Group is undervalued

Charles Savage

Purple Group CEO Charles Savage said the company’s market cap of R964 million is far below the fintech company’s real value.

In a podcast celebrating EasyEquities’ ninth birthday, Savage said he views the business in three ways – value created, people platform, and partnerships.

EasyEquities is 70% owned by Purple Group and 30% owned by Sanlam and includes EasyEquities International, RISE, EasyProperties, and EasyCrypto.

He said the perceived value of around R1 billion of what Purple Group has created and what is yet to come does not match reality.

EasyEquities boasts 2 million registrations and 850,000 active investors, which Savage argues cannot be recreated with R1 billion.

“Just in our community of registered and active investors, I find more value than our share price represents,” Savage said.

He added that while it is possible to recreate the EasyEquities platform for R1 billion, the new player will be nine years behind them.

“We have a nine-year advantage over a new market entrant, and we are not stopping. We are investing more today than what we did nine years ago,” Savage said.

“The Purple Group share price, therefore, does not even reflect the platform we have created.”

Another valuable asset for EasyEquities and Purple Group is their partnerships with Capitec, Telkom, Discovery, Sanlam, GCash, and Satrix.

He argues that a new entrant could not “take a billion rand and bribe these partners” to offer the platform to their users.

“They will tell you to go away because there is no value for them. It lasts as long as it comes through the door, and then it is gone,” he said.

“You can take all the money in the world, but you will not be able to replicate the partnerships we have created.”

Savage argued that the share price does not even reflect the value of the partnerships EasyEquities enjoys.

Added to that, EasyEquities is only nine years old and, therefore, is only starting to gain the insights and experience to capitalise on the opportunities it sees.

“I am not trying to talk up the share price. I am reflecting on the value we have created through EasyEquities,” he explained.

Savage said if others saw the same value as he does in EasyEquities, the Purple Group share price would not be at 70c.

“I don’t care where the share price is. I never really have. What I worry about is the value we create in the three areas I have mentioned,” he said.

Purple Group’s finances

EasyEquities does, as Savage argued, hold great potential, especially if they can succeed in their partnership with GCash.

GCash is the largest and fastest-growing mobile wallet in the Philippines, which gives it access to 70 million active clients.

However, many investors are waiting for Purple Group to start reflecting the potential of their opportunities in their bottom line.

The success of new projects is not guaranteed, and it can have a short-term impact on Purple Group’s bottom line.

Even after the Purple Group share price lost 80% in value since January 2022, it is still trading at high valuations compared to its peers.

Purple Group trades at a price-to-earnings (P/E) ratio of 58, much higher than other fintech and financial companies.

Its price-to-sales (P/S) and price-to-book (P/B) values are also much higher than most of its peers.

The table below shows how Purple Group’s fundamentals compare with fintech provider Blue Label, Absa, and Nedbank.

Price multiplePurple GroupBlue LabelAbsaNedbank