HL/ARW/BGEO/JUST

Hits: 103

Hargreaves Lansdown  – Trading Update

Share Price 1592p

Mkt Cap £7551m

Conflict Disclosure: No Holding

 

 

  • Update Net inflows of 3.8% in the 4 month period to April. AUM down 8% to £96.7m. Revenue was £190m (+19% yoy) and ytd revenue is up 13% to £448m. Dealing activity was strong in the period. Dividend expected to be paid as usual.

 

  • Estimates Revenue to June 20 is expected to be £503m. 89% of that has been delivered in the first 10 months. Upgrades despite market falls.

 

  • Valuation PE 29X Yield 2.7% AJ Bell trades on 55X.

 

  • Conclusion With the recent news that RGL Management says it is now close to launching a class action for HL’s marketing of Woodford the unmentioned elephant sauntering past the boardroom door is the potential Woodford claims. But trading is good evidenced by the chart below. Personally not sure risk/reward is reflected in valuation.

Arrow Global – Q1 Update

Share Price 84p

Mkt Cap £149m

Conflict Disclosure: No Holding

 

  • Update Collections of £85m represent 92% of assumed collections. Asset Management revenues grew 2.6% to £23.6m. Cash headroom £150m and short term uncertainty is noted due to court closures and a frozen property market. Medium term outlook references a further €356m closures of commitments taking fund management commitments to €1.2bn and potential attractive returns from investment and servicing opportunities.

 

  • Estimates Revenue was down 11% in Q1 while full year 2020 anticipates a 7% decline in revenue and a meagre £10.8m PBT.

 

  • Valuation PE is 6.5X on current estimates. 84 months ERC is £1.8bn and debt at the year end was £1.2bn with NAV of £202m which compares to a market cap of £149m

 

  • Conclusion Medium term the company’s transition to a fund management business has the potential to re rate the company. If it can navigate COVID disruption. It looks too early to be certain it will. The risks are high just now as is the upside. With downside of 100% and more than that in upside this is a gamble.

 

Bank of Georgia – Q1 Results

Share Price 882p

Mkt Cap £416m

Conflict Disclosure: No Holding

 

  • Update Q1 NIM of 5% is down from 6% last year on account of loan yields reducing from 12.2% to 10.8% while cost of funds increased from 4.6% to 4.7%. Cost of risk increased sharply from 1.7% to 7.4%. Cost income increased to 38.6%. The bank reported a loss of GEL 112.97m on account of the significant GEL 220m impairment charge which is COVID related. CET1 ratio 8.3%. No dividend in 2019. Outlook is confident the bank will emerge from the pandemic having achieved its priorities

 

  • Estimates Current estimates assume a GEL 151m profit which assumes a recovery.

 

  • Valuation NAV is 2017 GEL or £511m. 19% discount to book.

 

  • Conclusion This very high return bank hasn’t previously been tested in a sudden downturn as we have now. If the impairment provision get released the traditional 20% ROE could result in perhaps 80% valuation upside. There is better risk/reward elsewhere.

 

Just Group – AGM Update

Share Price 49p

Mkt Cap £512m

Conflict Disclosure: No Holding

 

  • Update The company has introduce policies to reduce interest rates for customers who have died and can’t sell their house as well as other measures. Organic capital generation expected in 2020. Excess capital has grown by £60m in 4 months but solvency coverage has reduced to 138% as interest rates have reduced increasing requirements. 15% of their bonds have suffered rating downgrades. It is too early to estimate the impact of the higher death rate. Their markets however are resilient with retirement income sales in line with expectations.

 

  • Valuation NAV is £2.3bn and market cap £512m

 

  • Conclusion The business is looking resilient. As long as the balance sheet doesn’t implode there is significant upside. With 80% in financial services, utilities, communications, infrastructure, government and consumer staples this could be an opportunity.