Financial Grime 25 September 2018

Sep 25, 2018 / News

This job is enjoyable sometimes. It was a real pleasure to hear a CEO of a fund manager describe launching a fund as like fishing. Its important to tie the right fly as well as being on the right bit of the river he explained. I had the feeling this was someone enjoying themselves.  Of course no names mentioned.

S & U – H1 Results 

Share Price 2560p

Mkt Cap £307m

  • Results Revenue up 23%, PBT up 17% and EPS up 17%.  Gearing 78% and dividend up 14%. The all important impairment number was slightly higher than expected. Outlook is confident.
  • Estimates Consensus looks for 21% revenue growth and 20% PBT growth to £36m
  • Valuation The company is earning a high 17% ROE and is growing strongly.  P/Book is 1.8X. PER 10.6 and yield 4.7%
  • Conclusion This is all about whether impairment will stay within range and its binary. If the impairments remain under control in the used car business the shares are too cheap and id they don’t it is too high. My personal bet is with the former.

Alpha FX – Trading Statement 

Share Price 555p

Mkt Cap £185m

  • Statement Trading in September month has been particularly strong. The board expects results to be ahead of expectations
  • Estimates 28% PBT growth is currently forecast to £17.8m. EPS 20% growth to 20.6p.
  • Valuation The shares trade at 26X current year earnings and yield 1.1% before upgrades which may make it perhaps 10% cheaper.
  • Conclusion This company is highly valued. In my view the only time it is justified to pay up for a company is when it is at an early stage and the operational leverage of high top line growth combines with high margins to ensure the company can grow into its valuation quickly. Alpha FX is one of these. Given the overseas expansion this company could show rapid growth. 

Park Group – AGM Statement

Share Price 67p

Mkt Cap £125m

  •  StatementThe statement says that cash balances are ahead of last year reflecting growth in the business and the management are optimistic about future opportunities. New customers have been signed and new management have been appointed
  • Valuation The shares have drifted from 87p to 67p over the course of this year. At this price the shares are on 11.3X March 19 and yield 4.8%.
  • Conclusion The shares are priced not to grow.  The future opportunities are significant while the underlying business is strong and cash generative. This is an opportunity to own the stock ahead of the future opportunities becoming clearer and priced into the valuation.

Mortgage Advice Bureau – H1 results

Share Price 648p

Mkt cap £330m


  • Results Revenue up 17% to £57.9m (2017A £49.6m) (2018FYE £118.4m).  Gross profit was up lessto £13m (2017A £12m) (2018 FYE £27.2m).  PBT up   11%  to £7m (2017A £6.3m) (2018E £15.8m). and EPS up 11% to 11.7p.  DPS up 12% to 10.6p. Unrestricted cash £12.5m (2017A £13.2m). Adviser numbers up 6% to 1138 although the average number was up 13% over the period.. Market share has gone from 4.2% to 4.7%. Outlook is in line with expectations.
  • Estimates Our full year estimates assume 11% PBT growth to £15.8m, 10% EPS growth to 24.8pand a 24p dividend. No changes ahead of the analyst meeting although we expect to review our estimates post the meeting in the light of a slow property market currently.
  • Valuation  The shares trade at 25X December 2018 earnings and yield 3.8%. Our price target is 630p, a little below the current price and ahead of the analyst meeting there is no reason to change this.
  • Conclusion The shares appear up with events. Buy to Let has slowed but first time buyers shows a small increase and the company expects a flat market going forward against which market share gains should enable them to grow.  The company talks about vertical integration and new services which may be a sign of the existing model maturing. We remain of the view the shares are up with events.

CMC Markets – Pre Close

Share Price 165p

Mkt Cap £478m

  • Statement Q2 has seen sustained period of low volatility which together with regulatory change results in expectations guided below previous expectations. 20% reduction in volumes is the new expectation against the previous guess of 10-15%. Results are due 22 November
  • Valuation Current PER is 12.9 ahead of downgrades. Earnings will grow from there due to the ANZ white labelling agreement so going forward the shares trade at 11X before downgrades.  IG Group trades at 13.9X and Plus at 7.9X


Conclusion  All these businesses will prosper in the medium term.  The current period of volatility is a good opportunity.  The valuations are roughly in order of client duration where the longer duration of a client corresponds to a higher valuation. Which looks reasonable.  Though that shows the market is currently focussing on risk rather than reward. If it focused on reward it would apply a higher rating to the higher margin Plus 500.  I have found in general it is good to buy in places where the market is focussing on risk