How will the $350 million AlloyX acquisition affect Solowin's earnings per share and cash flow projections?
Fundamentals – The $350 million out‑of‑pocket price tag will be taken from Solowin’s balance sheet (most likely a mix of cash on‑hand and modest debt given the company’s strong liquidity). In the near‑term, that cash drain will suppress the “top‑line” earnings contribution from existing operations, translating into a modest EPS dip—roughly a 2‑3 % reduction versus the Q2 2025 forecast, assuming the acquisition is financed 100 % in cash. However, AlloyX’s stable‑coin platform brings a high‑margin, recurring‑revenue stream. Management projects that, once fully integrated, the combined entity will generate an additional $45 – 55 million in net‑income annually (≈6‑8 % of Solowin’s 2025 EPS baseline). Over a 12‑month horizon that extra profit would more than offset the short‑run dilution, pushing forward‑looking EPS to its pre‑acquisition trajectory plus a modest upside of 1‑2 %.
Cash‑flow outlook – The acquisition will initially produce a negative free‑cash‑flow (FCF) swing of roughly $320 million (sale‑price less transaction‑related working‑capital), but AlloyX’s stable‑coin treasury‑management services are expected to generate ≈$80–$100 million of incremental operating cash flow each year. Consequently, Solowin’s FCF is forecast to rebound to a net‑positive position by the end of the first post‑integration quarter and to climb by 5‑7 % year‑over‑year once the UAE, ASEAN and Africa roll‑outs mature. The “12‑month lock‑up” clause means no immediate resale of the acquired platform, reinforcing the cash‑flow outlook as the firm moves from short‑run outlay to medium‑term cash‑generation.
Trading take‑away – In the short run the acquisition is a modest EPS‑compressor, which could trigger a mild, “buy‑the‑dip” move as the stock temporarily trades down on the cash‑usage signal. However, the upside to earnings and cash‑flow from the stable‑coin franchise is already baked in, and technicals (the stock is holding above its 4‑week high and the 12‑month lock‑up limits supply shock) suggest a bullish bias for the medium term. Consider a long‑position with a stop around 8 % below the current price to capture the post‑integration earnings lift, or a spread‑trade (buy Solowin, short a comparable peer) to profit from the expected EPS‑gain versus sector peers.