Litigation Capital Management – FY Results

Share Price 86p

Mkt cap £97m

Conflict Disclosure: No Holding

  • Results Revenue of A$34.7m (2018 H1 A$29.68m). PBT adjusted A$12.28m (2018 H1 A$12.9m). EPS 8.07c (2018 H1 15.07c).  Cash receipts were A$26.8m against deployments of A$27.8m while the company has net cash of A$49.1m. The pipeline consists of 64 opportunities. The company reports a ROIC cumulative sine 2012 of 135% and an IRR of 80%. Outlook is “excited”
  • Estimates This looks to be significantly above the A$9.5m PBT I am seeing for consensus and in the year ahead to rise to A$14.9m currently is showing. That is EPS of 10p for the year to June 2020. That looks far too low.
  • Valuation PER is 24.6X with a modest yield of 0.7% on estimates that are too low. NAV is A$76m which is £42m.  With an ROE above 42% perhaps this should trade at 3-4X book value which is £120m-£170m.
  • Conclusion I like this one for the three reasons that it has a higher ROE (42%) than comparators as well as not using fair value accounting and being at an early stage of deployment. . 

Nucleus- H1 Results

Share Price 157p

Mkt cap £120m

Conflict Disclosure: No Holding

  • Results Revenue up 4% to £22.1m which is derived from AUA up 6.9% and a modest reduction in revenue yield from 30.8bps to 30.2bps. PBT declined 7.3% from £4.9m to £4.6m as the EBITDA margin fell from 23% to 20.7%. The outlook refers to replatforming disruption amongst competitors and says that financial performance is expected to develop as planned. The company expects to deliver operating leverage over time.
  • Estimates FY PBT estimates at £6.8m, EPS 7.3p
  • Valuation PER 21.6X Yield 4%.  I guess AJ Bell trades on 53.6X while Integrafin trades on 34.1X. Just their flows aren’t quite as good.
  • Conclusion These results look lacklustre. The flows may be lower than peers as investment has gone in in H1. The peers of AJ Bell and Integrafin are hugely expensive. I wonder if the cheaper play on the market drivers would be Tatton Asset Management.

Sanne – H1 Results

Share Price 572p

Mkt cap £834m

Conflict Disclosure: No Holding

  • Results Revenue up 19.5% to £78.7m. PBT down modestly at £19.2m. EPS down 7.1% to 10.4p.The decline in operating margin to 26% is now unlikely to be recovered in H2, so the full year margin is now expected to be between 28% and 30%.The outlook is excited about new business wins while they have work to do improving the margins.
  • Estimates FY PBT estimates at £45.3m, EPS 24.5p. These are likely to come down modestly
  • Valuation PER 23.3X Yield 2.3%
  • Conclusion Expensive when the company has failed to deliver the hoped for operating efficiencies. This looks like downgrade number 2. Usually they come in three’s.

SimplyBiz – H1 Results

Share Price 199p

Mkt cap £193m

Conflict Disclosure: No Holding

  • Results Revenue up 20% to £29.1m. Adjusted EBITDA up 30% to £6.8m. Adjusted EPS up 8% to 5.52p. Net debt £30.1m. Outlook is said to be “in line” and the company is on track to meet expectations. Organic growth is calculated at 5%.
  • Estimates FY PBT is estimates at £14.8m, EPS 12.6p
  • Valuation PER 15.8X Yield 2.8%
  • Conclusion The pre close trading statement said management was “confident” in full year expectations and this word is repeated today. The shares have come back from their 240p high in June and look reasonable value.

Urban Exposure – H1 Results

Share Price 44p

Mkt Cap £70m

Conflict Disclosure: No Holding

  • Results At 9 September new committed loans are £97.5m, up from £54.3m at June. Pipeline is now £1bn of which £666m is in due diligence. Revenue, which lags was £5.3m which was the same as the operating costs of £5.3m. H2 is traditionally a busier period so the outlook statement says they are confident of meeting market expectations.
  • Estimates While the embedded value is growing the company isn’t expected to report a profit until 2021. With break even in H1 this looks a very conservative estimate.
  • Valuation It is too early to value this on a PER but with net tangible assets of £135.2m, the majority of which is loan book over 5 years the valuation is enticing when the average unlevered IRR is above 11%.
  • Conclusion Sadly few fund managers can take a 5 year view but for those that can exciting returns are on offer.

 STM Group – H1 Results

Share Price 40p

Mkt Cap £24m

Conflict Disclosure: I Hold

  • Results Underlying Revenue up 7% to £11.6m.  Underlying PBT down from £2.1m to £1.6m as the margin declined from 23% to 20%. The company has been investing in senior hires and IT infrastructure and the outlook says the second half is about concluding the initiatives started in H1 and they have strong expectations of a revenue and PBT uplift as a result of recent investment. Gross cash is £18.1m
  • Estimates The £4.4m PBT expectation as I understand it includes the one off gains, so these results look to be in line with expectation with the company reporting £3.4m of PBT in H1.
  • Valuation This is a year of one off gains and costs. Looking at 2020 forecasts anticipate £4.7m PBT, which is 6.2p EPS and a 2.4p dividend. That’s a PER of 6.5X and a yield of 6%.
  • Conclusion  Cheap as it comes with a year of investment while the company is becoming a more UK focussed business.  Next year this could perform very well once the costs of extra infrastructure are fully embedded.

jeremy@charltonillingworth.co.uk