This weak pound together with weak markets is stimulating M&A activity. Yesterday the Hong Kong Exchange makes an offer for the LSE, the same day as the south african Growthpoint launches a partial offer for Capital & Regional.  On Tuesday this week Galliford Try and Bovis announced they are in talks to merge their housebuilding business.  I don’t remember feeling so relaxed that markets are weak.

Value

  • Maybe value is about to come back after a very long wait. This chart is of the ishares S&) 500 value ETF relative to the ishares S&P 500 growth ETF. And we have so many cheap shares, particularly at the smaller end of the spectrum.

Brooks Macdonald – FY Results 

Share Price 1960p

Mkt Cap £273m

Conflict Disclosure: No Holding

  • Results Revenue is up 7.3% to £107m off the back of discretionary AUM up 6.8% to £13.2bn. Underlying PBT up 11.8% to £21m as the operating margin reached 19.6%. There is a £4.8m goodwill write down, a £3.3m restructuring charge, and a client relationship impairment charge. The tax rate increased resulting in EPS up 2.2% to 125.9p. Cash is £35m and the outlook statement refers to improving margins and acquisitions.
  • Estimates Revenue is in line with expectations but PBT looks to be usefully ahead of the £19.1m consensus.  The £22.5m expected for the current year could be a little light.
  • Valuation PER is 16.7X and yield 2.7%. Brewin trades at 15.9X and Rathbone at 17.7X.
  • Conclusion it is two years the new CEO has been in place over which time the shares are down 10%. There have been a significant number of issues to deal with around the Spearpoint business as well as streamlining the operations and eliminating overlap. I get the sense this is drawing to a close as the company is now looking at acquisitions again while there is margin upside potential. With a low (ish) valuation this looks like a good time in the companies lifecycle.

jeremy@charltonillingworth.co.uk