The Insuretech space is beginning to mature as Trak Global, the UK market leader serving 40% of UK telematics information for insurers acquired its Canadian rival for an undisclosed sum
TP ICAP – Press comment
Share Price 300p
Mkt Cap £1.69bn
- Comment – It seems the TP ICAP have launched a legal action against Nex for promises made to staff that were allegedly at odds with the contractual position of staff at the time of the acquisition of ICAP’s voice broking business in 2016. The Sunday Times article notes that the share price of TP ICAP has fallen 44% this year following the ousting of the CEO last July on a profit warning and more recently the Chairman standing down as of March.
- Estimates – Consensus forecasts have moved down from 40.9p to 33.1p this year. Of the 6 analysts maintaining forecasts on this stock none are sellers. 3 have a “Strong Buy”, 2 a “Buy” rating and there is 1 “Hold”. The dividend is 16.9p for the current year to Dec 18 which is almost 2X covered and the company is expected to have net cash of c.£63m at the year end.
- Valuation – On current earnings the PER is 9.1X and the yield is 5.6%
- Conclusion – These businesses are difficult to manage and require a firm focus on the needs of investors while relishing challenges with a lack of emotion. It appears that the pre merger management team of Terry SmithCEO, Paul Mainwaring CFO, Stephen Duckworth COO, Angus Wink CEO Europe, and Simon Clark Head of Legal have now all gone. While the analysts are positive I suspect the earnings could continue in a downgrade trend until new management are appointed
ASOS – Trading Update
Share Price 4186p
Mkt Cap £3.51bn
- Update – November trading deteriorated such that sales for the 3 months to November were up 14% while the gross margin deteriorated by 160bps. The company blames weakening consumer confidence, warm weather resulting in an increase in discounting and promotional activity.
- Estimates – Current estimates assume 22% revenue growth to £2.96bn and 4% EBIT margin resulting in after tax profit of £98m (FY August 2018 – £82.4m). Revised guidance is for 14% revenue growth and 2% EBIT margin. That will be a downgrade of 50% to consensus estimates on the margin alone.
- Valuation – On pre downgraded estimates the PER is 35.8X. Net cash was £42.7m at August 18.
- Conclusion – This may well be the first morning of many retailers over Christmas as ASOS is one of the more successful retailers. The shares are off 44% from their highs. Boohoo trades at a PER of 38X 12 months forward earnings and is 25% below its highs although in September Boohoo raised its forecast guidance for revenue growth from 38% to 43%. Last January trading update also resulted in forecasts. Boo hoo may be weak ahead of the trading update in January but if the online retail sector does suffer a downturn we could get some M&A activity.