• Brewin completes the acquisition of Investec Ireland for EUR 44m which amounts to under 1% of AUM.

TP ICAP – Q3 Update

Share price 343p

Mkt cap £1,931m

Conflict Disclosure: No Holding

  • Update Market conditions have been good in Q3. Rebenue was up 17% year on year which means year to date revenue is now up 6%. Global broking (70% of revenue) was up 10% in Q3 while energy and commodities was up 24%. The growth areas of institutional services and data & analytics, which now account for 10% of revenue were up 38% and 9% respectively.
  • Estimates Despite this strong Q3 the guidance of low single digit revenue growth remains unchanged as the company highlights “geopolitical uncertainties”. Forecasts assume 1% revenue growth. Looks like we can expect the company to be pulling a rabbit out of the hat in a January pre close statement.
  • Valuation The PER is 11.2X 4.5X and yield 5%
  • Conclusion  With a relatively new CEO and having settled an FCA fine of £15m while the integration has taken longer and cost more than hoped it is understandable that the company now wants to keep expectations low. That is a good place to be. Meanwhile the growth businesses are slowly becoming a larger proportion of the business. This is a time when value stocks are starting to outperform bubble stocks and this business could be at the beginning of a 3 year outperformance cycle.

City of London Group Plc – Bank License

Share Price 135p

Mkt Cap £54m

Conflict Disclosure: No Holding

  • Recognise Financial Services has submitted it bank license application.  Once authorised the companies’ lending activities will be consolidated within Recognise and new equity finance will be raised.
  • Estimates There appear to be no forecasts while last year to March 19 the company lost £3.6m after absorbing £1.7m of bank license application costs. The loss was delivered by the equity release provider, Milton Homes, which is running off its book and generating cash of £2-£3m pa. Asset finance , Bridging and the intermediary delivered a £342k contribution last year.
  • Valuation. The NAV is 83p/share. The valuation should perhaps be viewed by discounting the 2024 targets which involve loans of £1.1bn, a cost income ratio of 36.5% and PBT of £30m. The company will require new equity to achieve that.
  • Conclusion Investors will perhaps wait for the equity raise, which may yet be 6 months away, but that may well be at a level above the current share price.