MAB1/EMG/SDR/EQN

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Mortgage Adv.Bur.–Trading Update

Share Price 578p

Mkt Cap £299m

Conflict Disclosure: No Holding 

  • Results H1 revenue has increased 4% to £63m, of which 10% was from the acquired First Mortgage business. While Q1 was strong and the number of AR’s increased 1.8% in Q1 to 1,484 the housing market closed during March. 245 AR’s were placed on furlough but since 13 May there has been a “sharp” increase in housing market activity and adviser numbers have recovered to 1,472 by 24 July. The group is currently trading “strongly”.
  • Estimates A 20% revenue fall is anticipated for the current year providing EPS of 18.6p and PBT of £11.8m, recovering to £19.4m PBT and EPS of 32p the following year. The stamp duty changes could bring the 32p EPS forward.
  • Valuation On the recovered earnings in 2021 the shares trade on 18X and 31X trough.
  • Conclusion The closing of the housing market is likely to be one of those events that purges weaker AR’s and will with hindsight be seen as a strengthening event. This may similarly be seen as a reasonable entry point, though 18X is not hugely cheap.

Man Group – H1 Results

Share Price 125p

Mkt Cap £1,857m

Conflict Disclosure: No Holding 

  • Results H1 FUM was down 8% to $108.3bn. Net outflows were 1% in H1 including 1.6% in Q2. Adjusted management fee PBT was up 3.6% to $86m and total PBT adjusted was down 40% to $94m. EPS 5.4c. Interim DPS 4.9c. Cash $202m. Management fee margin declined from 68bps to 66bps. Outlook says the company is in a “strong position”. 
  • Estimates Forecasts anticipate $214m PBT in FY 20 which with outflows in Q2 and $86m in H1 looks materially too high. 
  • Valuation EV/AUM 1.9%. PE 13.3X
  • Conclusion The shares have gone sideways for 6 years. Hard to see this changing.

Schroders – H1 Results

Share Price 2968p

Mkt Cap £9.56bn

Conflict Disclosure: No Holding

  • Results are described as “resilient” with PBT down 10% to £306.2m. Net inflows were 7.6% in H1 and AUM rose 5% to £525.8bn, but lower revenue margins which fell from 46bps to 39bps led to a 2% decline in revenue to £971.6m. Costs rose modestly resulting in a 10% PBT fall. EPS 85.8p (2019 98.6p). Net assets £3.9bn. Outlook says the diversified business will continue to show resilience.
  • Estimates FY PBT estimated to be £581m, a 7% decline.
  • Valuation PE 17.6X Yield 3.8%
  • Conclusion The strong inflows are encouraging but I can’t help but feel such a strong brand should be able to achieve a higher fee margin than 39bps. The rating reflects the brand, but the pricing doesn’t which is worrying.

Equiniti – H1 Results

Share Price 143p

Mkt Cap £522m

Conflict Disclosure: No Holding

  • Results Revenue down 11.7% to £243m. EBITDA down 31.9% to £41.9m delivering an EBITDA margin of 17.1%. Underlying EPS down 61% to 3p. Net debt £355m. The group suffered from lower interest rates, withdrawal of dividend administration fees, share plan vesting fees and dividend reinvestment fees. Guidance withdrawn. Outlook is to prioritise the reduction of debt.
  • Debt Covenants are net debt/EBITDA 4X falling to 3.75X and 3.5X in 2022. Currently stands at 3X.
  • Valuation NAV of £540m includes £538m goodwill and £292 other intangibles. Last year’s EPS was 8.4p and the shares trade at 17X.
  • Conclusion This is a high risk situation and the shares don’t reflect the risks.