Financial Grime - 26 October 2018

Oct 26, 2018 / Financial Grime

News

  • Park Group schedules a strategy update for 4th December
  • KW Wealth gets FCA approval for the £4m Marchant McKechnie acquisition which brought £200m AUA which starts to build the IFA business. This high quality business was acquired at 4.7X EBITDA or 2% AUA.
  • Disappointing to see Mattioli Woods awarding 1p options to the executive team today.

 

Brooks Macdonald – Q3 update  

Share Price 1755p

Mkt Cap £244m

  • Update 1.3% net inflows over the quarter which with investment performance provided 3% increase in AUA over the period to £12.8bn.  Organic growth was 2% in the UK business while the channel islands business suffered 3.1% net outflows. The launch of the Responsible Investment Service may enhance organic flows although client sentiment is reported to be softer.
  • Estimates June 19 foecasts anticipate 12% revenue growth which in the light of 3% AUA growth over the quarter to September looks right.  Improving margins translate thgis to 22% PBT growth. 
  • Valuation EV/AUA is 1.5% while the PER is 13.3X and yield 3.4%
  • Conclusion The shares are down 12% over the last 12 months and have fallen 21% from their highs in September. It is now looking very cheap relative to AUA. If current bear markets get worse earnings may be vulnerable but we are now approaching value territory and investors need to start pricing up their ears. There are going to be some bargains.

 

Nucleus Financial Plc – Q3 update

Share Price 161p

Mkt Cap £123m

  • Update 2% net inflows over the quarter to September which with help from the market increased AUA by 2.4% over the quarter. This is a slow down from net inflow rates in 2017 which is in tune with what others are reporting. By way of comparison Integrafin reported net inflows of 3% over the quarter. This could get competitive.
  • Estimates Forecasts anticipate 10% revenue growth in the year to Dec 18 to £44.6m which gives £7.3m PBT. Average AUA was up 15% Q3 18 on Q3 17 so that looks conservative (which given markets are now falling is useful)
  • Valuation EV/AUA is 0.74%, PER 21 (Dec 18) and yield 2.9%. Integrafin trades at an EV/AUD of 2.4% which is a PER of 23 on September 19 estimates
  • Conclusion The valuation differential from 0.7% to 2.4% AUA for Integrafin is a function of Integrafin making 49% operating margin while Nucleus makes a 15% operating margin.  Platforms is a scale game and either Nucleus will grow or Integrafin will acquire it.  Both are good for shareholders.