Hits: 11

23 April 2020

AJ Bell – Q2 Update

Share Price 299p

Mkt Cap £1,225m

Conflict Disclosure: No Holding

 

  • Results Net inflows 2.4% in the quarter to March and market headwind (storm) of 14% meant AUM was down 12% to £48.3bn. Customer numbers were up 9% to 262,179. The company has launched a War on COVID charity and the CEO is donating 3 months wages to the charity.

 

  • Estimates A modest 3% reduction in PBT is expected in 2020 to £36m. EPS 8p.

 

  • Valuation PER 37.4X 1.7% yield.

 

  • Conclusion This is one of those very long term stocks. Over 10 years the valuation is likely to prove justified.

22 January 2020

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AJ Bell – Trading Update 

Share Price 404p

Mkt Cap £1,655m

Conflict Disclosure: No Holding

  • Update. Net inflows of 1.2% on the advised platform and 2.7% on the D2C platform taking AUA up 5.1% overall to £47.2bn.  The advised platform flows of 1.2% compare to Integrafin’s 2.5% disclosed yesterday. Customer numbers grew faster at 4% and AUA are 27% ahead of where they were a year ago.
  • Estimates anticipate a 13% revenue increase in the year to September 2020 and a 21% PBT increase which should trouble the scorers with AUA up 27%. The CSR initiative provides £10m for charity if earnings double over 3 years (underwritten by Andy Bell). Forecasts anticipate a 60% increase over 3 years.  
  • Valuation PER 44.9X Yield 1.4%. 2022 PER is 33X. If EPS was to double by then from 2019 the Per would be 27X
  • Culture The management stakes and incentives combined with entrepreneurial spirit make this a high quality culture, perhaps explaining the high valuation
  • Conclusion The valuation makes it hard to make a buy case even if targets are met and upgrades delivered.  The shares are priced close to the placing price of 400p and 420p at which management stock was placed in December. Can’t find a buy case.

24 October 2019

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A J Bell – Trading Update

Share Price 371p

Mkt cap £1.52bn

Conflict Disclosure: No Holding

  • Update Customer number up 19% to 218,169 and AUA up 16% to £44.9bn which implies an “average” size of £205k. Advised was up 13% while D2C was up 28%. Organic flows over the year were 9% in advised and 18% in D2C.
  • Estimates 16% revenue growth and 33% PBT growth is expected which should cause any trouble for the scorers.  Going forward 16% PBT growth is forecast.
  • Valuation PER 49.3X yield 1.3%
  • Conclusion The fast growth of the D2C assets may well show some accelerating trend towards investors taking control of their assets, which will perhaps be enhanced by Woodford.  The valuation is eye watering, so is the model.

25 July 2019

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AJ Bell – Trading Update 

Share Price 428p

Mkt Cap £1748m

Conflict Disclosure: No Holding

  • Update AUA was up 7% over the quarter to £50.7bn driven by net inflows of 2.5% and market tailwinds.  Customer numbers were up 5%.
  • Estimates are predicated on turnover growing 23% for the year to October 2019 . AUA at end September 2018 was £48.1bn so today are 5.4% ahead. 
  • Valuation PER 57.1. Yield 1.1%
  • Conclusion That valuation bring tears to my eyes. Good company and perhaps low liquidity has caused a crush in the doorway market “good company”

23 May 2019

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AJ Bell – H1 Results 

Share Price431p

Mkt Cap £1.76bn

Conflict Disclosure : No holding

  • Results Revenue up 17% to £50.1m PBT up 27% to £17.7m.  PBT margin 35.3%. Customer numbers up 9% to 214853 and AUA up 3% to £47.7bn. Outlook is confident
  • Estimates anticipate 20% EPS growth for the year
  • Valuation The company IPO’s in December at 160p and is now 431p per share putting it on a PER of 53 and yield of 1.2%
  • Conclusion Undoubtedly a high quality situation where misallocation of cheap capital is causing a squash in the doorway market “quality”. Having IPO’d at a valuation of £650m and 5 months later being valued at £1.76bn I have got vertigo.

26 April 2019

AJ Bell  – Q2 Update

Share Price 377p

Mkt Cap £1.54 bn

Disclosure No holding

  • Update 2.3% net inflows combined with a 5.6% market uplift to bring total AUA up 8% to £47.7bn. This is a little lower than the 3.3% net inflows in the prior year when market movements were negative.
  • Estimates The statement says it is in line with expectations at the January update
  • Valuation  PER 48.9X yield 1.3%.
  • Conclusion The ROCE for this stock is 43.9% and the 5 year average ROCE is 33%. If you can reinvest the cash generation at that rate in theory you would be happy to pay 49X. But I have difficulty at this sort of rating.  It just looks priced for perfection.27 November 2018

27 November 2018

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A J Bell – Pricing 

Share Price Range 154p-166p

Mkt Cap £626- £675m

  • Timing A J Bell confirms the IPO pricing. Prospectus will be published later today. Applications must be in by 5 December with final pricing announced on 7 December and the shares start trading on 12 December.
  • Valuation I think the comps for AJ Bell are Integrafin and Hargreaves Lansdown which trade on 24X Sept 19 PE and 29X June 20 PER respectively. Not sure what the forecasts are but last year they did £28.4m PBT and £22.6m PAT which may grow at c 20% so lets say £34m BT and £27m PAT for Sept 19. Perhaps if current markets persist this may be demanding but the PER would be c.23X – 25X.  That looks good value. The yield would equate to 2.8% – 2.6% ignoring potential special dividends, of which there have been a number historically.
  • EV/AUM  In terms of EV/AUM the valuation represents 1.25%-1.35% which compares to Integrafin at 2.7% while Hargreaves Lansdown trades at 9.4% largely representing the differing revenue yields on the AUM.

8 November 2018

AJ Bell – Results and IPO  

·         News The intention to float announcement is out from AJ Bell this morning alongside its results for the year to Sept 18.  Customer numbers were up 20% to 197,912 and AUA was up 16% to £46.1bn. That’s an average customer size of £233k. Net inflows were 14.6% over the year (2017 – 16%).  Revenue was up 19% to £89.7m which represents an average revenue yield of c 20bps. PBt was up 31% to £28.4m while dividends for the year amounted to £14.6m, representing a 65% payout ratio  alongside a further special dividend of £8m. Net assets are £64m, of which £50m is cash.

·         Valuation  Hargreaves Lansdown, hampered by its comparatively high 45bps platform charge produced 9.6% net inflows in the year to June 18 which also results in a smaller average client size of £84k. HL trades at 34 X June 19 estimated earnings.  It appears that AJ Bell with its superior growth prospects and lower charging structure should merit a premium to HL.  While I struggle to justify HL’s rating I can think of a good pair trades here.

·         Conclusion There is a pre IPo teach in for independent analysts which is good to see and all companies should adopt this approach to ensure better education for analysts. This company has enormous potential.  This is part of the shift of trading volumes away from institutions towards retail towards a time rather like 80 years ago. Back when the majority of the market was owned by retail investors the retail broker also owned the corporate relationships.  That will happen again. Last time round these brokers also had proper names like Pidgen Stebbings Gow and Parsons. Perhaps by then this company will be called Hargreave, Bell and Flowers.