D2C platform charges
Interactive Investor has changed its charging structure increasing flat
fees and reducing its trading charges. It has changed the quarterly
£22.50 fee to monthly charges that equate to a rise of 33% for the
cheapest service and 160% for the most expensive service. In order to
illustrate some value they paid the ever friendly Land Cat to do some
research that shows their charges are hugely lower than AJ Bell, Fidelity
and Hargreaves Lansdown.
The give away that Interactive may be looking to IPO
was in their description of their fees as “Netflix” style. Given
recent valuations they may have been better to describe them as “Monzo”
Lawyers Note –Note
out this morning on the six quoted lawyers. I came away wanting to
buy DWF and Gordon Dadds. Full note is for subscribers. Please email
me if you want one. Annual sub to all notes is £1k+VAT.
reads aggressively where VPplc have been found guilty of price fixing in a
cartel on construction costs.
Asset Management – Trading Update
Net inflows were modest at £3m over the 3 months to 31 March but just
enough to claim the 24th successive quarter of net inflows
bringing AUM to £6.8bn. AUM was up 6.4% overall with help from markets
from £6.4bn at December.
look for a modest reduction in revenue for the year to September 2019
which looks a bit harsh given AUM are up 6% year on year at March. Perhaps
a function of having results in the grey days of November
EV/AUM 2.75%. PER12.3X yield 5.6%
Shares are down 35% from the 310p high last July. That’s the time to buy
these fund managers. The only hesitation is that the statement says they
have good long term investment performance which is akin to saying short
term performance is weak.
the yield curve is at its lowest since 2008 the valuation bubble derived from
low cost funding continues with Monzo now doing a private funding round at a
valuation of £2bn. That valuation equates to £1,300 per customer who signs up
for a free current account. They get a “hot coral” debit card. Personally
I will be holding the tin hat quietly under the desk for rapid deployment.
Asset Management – AUM update
The first asset manager to report quarterly flows to March is always a
good one. Net inflows were 4.6% over the quarter to March. Positive
markets meant that total AUM was up 15% to £13.25bn.
Estimates look for 6% revenue growth in the year to September 2019. With
AUM up 6% over H1 this looks an undemanding forecast.
PER 19.8 and yield 2%. EV/AUM is low at 2% on account of the low level of
profitability of the AUM relative to the scale of the AUM.
This company has a strong niche in environmental funds and consequently is
harvesting AUM rapidly. The low operating margin of 23% is because the
costs are too high for the scale of the business. With the business no
prioritising shareholder returns I find myself preferring Liontrust which
has a strong ESG franchise and consequently strong flows. Liontrust trades
at 2.5% EV/AUM and operating margins of 31%.
should be a good quarter for AUM with markets up. The FTSE is up 10.7%
since 31 December but retail sales on funds continue to negative as the
Investment Association reported last week for the last 5 months. It
could get really quite good if funds flows turned positive.
shall be buying Avocado’s whose price seems to be tracking Bitcoin at the
moment. At least Avocado’s downside tastes good.
Capital – Trading Statement
The large transactions referred to at the time of the interims continue to
be at an advanced stage but are taking a long time to close. Consequently
the company takes the view they are unlikely to close by their May year
end. The smaller transaction volumes continue to grow.
As a result the company expects the EBITDA for the year to be £4.5m-£5m.
Which compares to c.£7m that was anticipated. This compares to £3.1m that
was reported at the half year so c. £1.5m EBITDA in H2. £4.5m EBITDA may
be in the region of 8.5p EPS vs 13p previously.
PER 18X the downgraded EPS number. The shares have come back from almost
halved on the back of concerns over the larger transactions highlighted at
the half year.
The concern in this business has always been lumpy transactions. The
business remains an innovative business model which takes market share and
the reason for long closure times is entirely rational at the moment.
Which implies this is a time to buy the shares as lumpy transactions is a
double edged sword. The shares could test levels towards £1 today.
If there is any liquidity at those levels it will be a gift for a buyer.
Traynor – Acquisition
BSM is an Eastern England commercial property agent and consultant with 38
staff for up to £3m which is expected to be earnings enhancing.
The price is c 1X turnover and 5X profits which represents a 20% return on
capital. This looks potentially 15-20% earnings enhancing
PER 12 and yield 4.4%. The reason for the modest valuation is the low ROE
because the insolvency business is very heavy on working capital. As its
ROC increases through its diversification strategy this will improve
The ROE enhancing acquisition should deliver a re rating as well as
earnings enhancement. If the acquisition is 15% earnings enhancing
we might get 5p odd of EPS and 15X would give 75p. And who knows
Brexit could also deliver a few insolvencies.
Flow Meter is out this morning for premium subscribers comparing the flows over
the last 18 months for Platforms, Asset Managers and Wealth Managers. Also a
note on my recent Charles Taylor meeting. Uncomfortable U turn on that. Hope
the handbrake cable doesn’t break.
Markets – Downgrade Again
: No holding
CMC espect net income to be £110m for the year down 37% on the prior year.
This looks c. 10% below previous estimates
Pre downgrade the shares trade at 9X PER and yield 7%.
With a say 10% downgrade the dividend may only just be covered
It has been uncertain how consumers would react to the ESMA regulation so
the uncertainty is understandable. However I note that Plus 500 started
Lithium CFD this week and their advertising on my facebook seems to have
accelerated. They are on a PER of 5.5X and yield 13%. Could be time for
: No Holding
– Quilter announces a recommended bit for Lighthouse at 33p per share
valuing it at£46m. This follows AFH bidding for it a few years ago
unsuccessfully at 13p per share. It appears the directors were right
to reject the AFH bid.
The bid values Lighthouse at 18X 2019 EPS
The bid looks likely to succeed. And the business will fit well with
Quilter who have the ability to use the affinity relationships and the
Brighton call centre nationally. Management options were dependent on 31p
share price by March 2020.
– FY Results
Revenue up 29% to £77m. Underlying EBITDA up 65% to
£23.8m. Adjusted EPS up 33% to 18.4p. Statutory EPS was negative 3.9p. Net
debt is £48.7m and a final dividend of 2p is proposed. Outlook – trading
is in line and the group sees further opportunities. Divisionally
institutional revenue was up 20% and private clients up 43% over the year.
These results are in line with expectations and going
forward 28% revenue growth is expected delivering 22p EPS.
PER 13.7 yield 1.8% EV/ EBITDA is 6.6X
I am sceptical that this acquisition machine delivering
alleged organic growth through acquiring businesses and cross selling is
unsustainable. The company strips out £4m of acquisition and
integration costs from results but includes the revenue synergy as organic
growth which seems like a mis match to me. But just now it has the
wind behind it.
Exposure – FY Results
The first full year results since it May 19 IPO when it raised £150m
reveal modest revenues of £3.9m and a small loss of £1.1m while it has
committed £525m of bridge funding across 16 loans (£32m each). Of
this £95m has been deployed at “loan to gross development” values of 67%.
The minimum income on the loan book over the life of the loans is £43m.
Pipeline is £670m loans.
No estimates are published on my system
With a NAV of £151m and £106m mkt cap the shares have disappointed so
The embedded value is building while the profits will come in the future.
The disappointment appears to be over timing of profits rather than
quantum which could represent an opportunity. I look forward to meeting
them at the analyst meeting.
It seems the US bond market is predicting a downturn while the equity
market is predicting otherwise. At some point these two markets will reach
find this chart more comforting when you do financials
small companies too – albeit in the US.
– announces the CFO is taking 3 months leave for a heart
–has 50.7% acceptances. Requirement is 90% but this can
-CEO exercises options and sells 103.8k shares at 592p
Financial – FY Results
Average AUA up 13.5% delivered revenue growth of 9.6% on the back of a
3.2% blended revenue yield reduction. Adjusted EBITDA was up 32.9%
delivering a 20.8% margin. EPS up 16.7% to 6.3p (2017 5.4p) and the
dividend was 3.9p per share, a 62% payout ratio. The outlook says the
company is confident in their ability to deliver on future plans.
For the year ahead expectations are for 5% revenue increase and 10% EPS
growth following market declines in Q4 so that AUA was up over 2018 only
2.3%. Strong markets in Q1 2019 should make this very undemanding.
PER 24.9, yield 2.7% which is 3.2X sales. Integrafin, which makes a 50%
operating margin trades at 28X and yields 2.3% which is 12.6X sales.
This looks quite pricey for 10% growth while pricing pressure is unlikely
to reduce. And the PER differential is modest between Integrafin and
Nucleus. Struggling to see any excitement here.