- Plus 500 announces more director purchases this morning. Their advertising is all over my facebook page. Just wonder if they are doing rather well at the moment.
- Platforms Last week Octopus entered the platform market acquiring start up Seccl, which provides a white label platform for IFA’s, for £10m. This equates to c. £100% of AUM which certainly brings tears to the eyes. Lets not do the read across to Nucleus, AJ Bell etc.
- Meanwhile in the retail platform space the Yodelar review of Nutmeg makes painful reading. They conclude that their poor returns and lack of competitive investment options means they just don’t appeal to consumers. Just after Investec wrote off £20m closing their robo and OBS has closed their Robo this year, SmartWealth
Wealth Manager Consolidation
- Tilney are in talks to acquire Smith & Williamson. Tilney has £24bn and Smith & Williamson £21bn AUM. This would make it a large competitor to Brewin and Rathbone who have £44bn and £49bn AUM each. Potentially this could introduce more competition for these two companies that produce reliable good margins. The Sunday Times referred to them as “mature” businesses.
- Valuation The EV/AUM is on the vertical axis and the number of bps of AUM that drops into profit is on the horizontal access below.
- Conclusion The pressure is on Rathbone. Costs are increasing under a new CEO who is yet to produce a new strategy while the valuation relative to it strong profitability is full. We get a strategy update in October.
Share Price 62p
Mkt Cap £116m
Conflict Disclosure I Hold
- Consolidation Last week Oakley Capital acquired a majority stake in Seven Miles, a German company founded 5 years ago in the gift voucher space. It is expected to sell gift solutions in excess of Euro 100m this year. By way of read across Park Group did £426m of billings last year so more than 4X the size and £116m mkt cap. So a majority stake would cost twice as much. There is plenty of headroom between quoted company valuations and many private company valuations.
- Valuation Park trades at a PER of 12 and yields 5.1%
- Conclusion Park Group is yet to reveal its mysterious new product. If it was ever to become a growth stock there is valuation and earnings upside. Or it could get consolidated where there is plenty of upside. The patient investor may benefit