Financial Grime 18 September 2018

Sep 18, 2018 / Financial Grime

News – M&A

  • Peel Hunt is allegedly in talks to sell to Santander.  It will be interesting if the price tag exceeds the £265m it was sold for in 2000 to KBC before being bought back from KBC in 2010 for £74m.  I am not aware of anything so statistically correlated with the stock market cycle than the sale of Peel Hunt.
  • Marsh Maclennan acquires JLT for £4.3bn, a 33% premium. That’s 30X current year PER
  • Paragon – Trading Update – In line – confident – buy to let pipeline up 25%
  • Cenkos –H1 Results – H1 revenue down at £18.1m. PBT £0.5m (2017 £4.6m). Net assets £26m. Mkt Cap £54m.  Suspect they are looking for Santander’s phone number.
  • XPS Pensions – Acquisition & Disposal Acquiring Keir Pensions Unit for £3.5m cash which provides pension administration to half the police forces in the uK. Selling the Healthcare consulting business to Punter Southall for £1.25m cash

JTC – H1 Results

Share Price 405p

Mkt Cap £436m

  • Results Revenue up 25% to £35.3m. Underlying profit up 56% to £8.6m and EPS 7.29p. Pipeline up 5%. They also have an active deal pipeline. Outlook statement is in line. Operating margin was 29.9%. Net debt has reduced to £23.3m. The £16.6m of non underlying items is a large number. The most significant element is the £13.4m capital distribution to employees following IPO.
  • Estimates Not changing given in line outdate
  • Valuation PER 24.1. EV/EBITDA 20X for FY 2018 and yield 1%.
  • Conclusion Given the macro threats are set to make expensive stocks cheaper this share is simply too expensive at 24X for a stock where the staff payments are stripped out of earnings and the organic pipeline is up 5% only.  Perhaps continued acquisitions will keep the game going

Personal Group – H1 Results

Share Price 538p

Mkt Cap £160m

  • Results Revenue up 7% to £21.1m. PBT up 27.7% to £3.9m and EPS up 28% to 10.5p. Net cash £18.4m and a modest increase in the dividend (1.3%) to 11.5p.  Outlook is encouraging as the strong H1 momentum has continued. The CEO announces he is stepping down.
  • Estimates Full year revenue estimates of £59m and pre tax profit of £10.3m look reasonable.
  • Valuation PER 19.5X and yield 4.3% ROA is 15.5%
  • Conclusion  This is a company with very strong distribution pipe and a core cash generative insurance business which is unique and grows slowly in a niche making high returns.  Until the uncertainty over management is resolved (CEO steps down) the shares are unlikely to perform.