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As I see Plus 500 fall 6% on upgrades yesterday, while IG Group, which has had outages recently rode 1% I start to feel that markets may now starting to be driven by liquidity rather than fundamentals, which is often a reason to start feeling more positive.   

Gresham House  – Placing

Share Price 486p

Mkt Cap 138m

Conflict Disclosure: I Hold

  • Placing The company announced a non pre emptive placing of £8m at 510p/share at 4pm yesterday. The company says it has a pipeline of opportunities it is in advanced stages of assessing. It aims to achieve £6bn AUM (currently £2.8bn) and a 40% margin providing 15% ROIC.  
  • Estimates No one really knows much about the shape of P&L’s today. Only balance sheets matter. The company had £19.4m cash, £10.5m contingent consideration and investments of £21.9m at Dec 19.
  • Valuation If we assume the £6bn AUM yielded say 1% revenue at 40% margin we get £24m operating profit. EV/Operating profit for that is 4.5X compared to today’s 10.5X.
  • Conclusion  Driven business on a mission. Current dislocation will help those with strong balance sheets and they may achieve their targets. If that happened the shares could double.
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Morses Club – CFO leaves

Share Price 46p

Mkt Cap £60m

Conflict Disclosure: I Hold

  • Change The shares fell 31% yesterday and no explanation is provided. Move along – nothing to see here.
  • Estimates Having warned on 11 March, but only on the digital losses while the underlying cash generative loan home collected business was said to be trading “strongly”, just 6 days ago the shares have fallen 60%. The NAV is £70m.
  • Valuation On current forecasts PE is 4X and yield 16% while the shares trade at 15%. Non Standard Finance trades on a PE of 3.8X and yields 19%.
  • Conclusion With no reassurance in the statement over numbers the market won’t believe in the estimates. NAV may be a reasonable market price until that reassurance is provided by the interim CFO, Andy Thomson, who stepped down from the position only last year.
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LCM   – H1 Results

Share Price 40p

Mkt cap £45m

Conflict Disclosure: No Holding

  • Results PBT of A$6.9m compares to A$4.3m last year. EPS 6.61c. Net cash $34.7m. NAV A$ 80.4m. Outlook says the company is confident it will continue to grow and deliver strong returns.
  • Estimates Analysts forecast strong growth over the next two years in profits to A$47m. This looks unlikely to change having delivered 53% of the June 20 number today.
  • Valuation PE 9X, Yield 3.8%. Price/NAV 1X
  • Conclusion The problems arise when funds masquerade as growth companies.  This is a fund which appears to produce good returns trading at NAV. That’s highly attractive.

jeremy@charltonillingworth.co.uk