Financial Grime - 23 October 2018

Oct 23, 2018 / Financial Grime

In these new found tricky markets its easy to feel beaten up at times. I recommend at times like that listening to the Q3 analyst call for US listed Cleveland-Cliff where the poor Goldman Sachs analyst gets told by the CEO he is “an embarrassment to his parents”.  We are however due for more challenging markets. In the first 9 months of this year 83% of US IPO’s were loss making. In the Uk that figure is 59% which compares to 35% in 2017

St James Place – Q3 Update 

Share Price 1035p

Mkt Cap £5.5bn

  • Update Net inflows continue to grow at 8.3% over the first 9 months of the year. AUM is now £100.6bn. Q3 flows amounted to 2.6% with the strongest flows in pensions.
  • Estimates Forecasts are predicated on £104bn AUM at 31 Dec 18 which looks about right.
  • Valuation PER is 23.8X and yield 4.8%. Mkt Cap/AUM is an eye watering 5.5%
  • Conclusion This model appears unstoppable until the customers start to care that so much of their AUM is finding its way into STJ’s revenue line. The share price says that’s not going to happen for a long time. Sadly that may well be the truth.

 

Plus 500  - Trading Update  

Share Price 1248p

Mkt Cap £1.422bn

  • Update Trading ahead of expectations albeit Q3 was 14% below last year as a result of the inclusion of 2 months trading under the new more restricitive regulations. New customers were down 51% while active customers were up 8% and the customer acquisition cost increased 129%.  EBITDA margin was 71% but the Q3 margin was 50%.  Cash was $371m so the company will continue to buy back shares. 8% of the customers in Europe have elected to be professional clients which accounts for 38% of the company’s revenue.
  • Estimates The company has achieved £435m revenue in the first 9 months and the full year expectation is £479m. With £77m revenue in Q3 the full year revenue number may be 5% light. EBITDA in the forst 9 months is c £310m while the full year estimate is £330m. This looks 10-15% light
  • Valuation PER 5.7X and yield 13.7%
  • Conclusion The market is betting its over for this company. That’s a dangerous bet for a company that makes 71% operating margin and trades at 5.7X.  Too cheap for now.