Does a 35% price drop make Trufin one of the best AIM shares to buy now?

Does a 35% price drop make Trufin one of the best AIM shares to buy now?


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Trufin (LSE: TRU) stock plunged 35% today (16 July) after the specialist fintech business released some disappointing news. I’m bullish on fintech (financial technology) as a growth area and would be open to getting a bit more exposure. But are these the right shares for me to buy after the drop? Let’s take a look.

What happened

AIM-listed Trufin operates three businesses: Oxygen Finance, Playstack, and Satago. Oxygen is an early payments platform that gets businesses paid faster. For example, its FreePay service enables organisations like councils to pay their suppliers early. Meanwhile, Playstack is an indie mobile games publisher.

Finally, Satago is an invoice finance platform. It’s here where the issue lies, with Trufin announcing today that Lloyds Banking Group had given notice to terminate its five-year commercial agreement with Satago.

This contract, which only commenced in July 2022, involved Lloyds’ licencing Satago’s software platform to support invoice factoring solutions for its customers. Lloyds had also made a £5m equity investment in the start-up.

Trufin said: “The board…believes that this decision is not a reflection of the quality or robustness of the Satago platform. It continues to believe in Satago’s ability to generate significant value through its Lending as a Service Embedded Finance strategy, underscored by its ongoing successful partnerships with Sage and the Bank of Ireland.

Still on track

The company was also quick to point out that its Playstack business was trading ahead of expectations. Consequently, the company as a whole “remains on track to achieve EBITDA profitability in 2024. The Group also remains fully funded to profitability“.

In 2023, the Satago segment grew revenue by more than 71% year on year to £3.8m. For context, full-year group revenue was £18.1m, up 30% from 2022, with Playstack generating £8m of that. So this contract loss isn’t necessarily a total disaster for the firm’s overall growth.

At the same time though, the loss of a blue-chip contract like this isn’t great news for Satago’s near-term revenue growth. And it raises a few doubts for investors, given the abrupt nature of the cancellation.

Last year, Trufin recorded an adjusted pre-tax loss of £6.1m, an improvement on 2022’s loss of £8.2m. The main risk with the stock remains the firm’s unprofitability, in my view.

My move

What to make of this then? Well, I find its Playstack operation interesting. It released its fastest-selling game — Balatro, a poker-inspired game — in February and sold more than 1m units in the first month. The platform expects to release a further five games in 2024 and is trading ahead of expectations.

Plus, management is bullish on Oxygen, the early payments business. In March, it said 87% of the next four year’s revenue was already contracted, with “an exciting pipeline of opportunities for further growth“.

After today’s fall, we’re looking at a price-to-sales (P/S) multiple of around three. That’s not too demanding and could prove to be a bargain if top-line growth continues and the firm starts posting profits.

Overall though, I think this one’s too risky for me. The stock is now trading for 50p, but I note that broker Panmure Liberum has already cut its price target to 31p from 101p.

For my money, there are more attractive penny stocks to buy today.



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