MCL/NSF/MTW/QLT

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Mapping well with 1929 and 2008…………..

This sell-off maps well against crashes of 1929, 1987 and 2008....
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Morses Club – Trading Update

Share Price 105p

Mkt Cap 134m

Conflict Disclosure: I Hold

  • Update Gross loan book is down 2.4%, but with impairments at the lower end of the range the performance of the HCC business is described as “strong”. The online portal was launched in February 2019 and is gathering momentum with £22.9m balances on Morses Club Card. Losses are higher than originally expected but digital remains on track to deliver a substantial improvement in losses during 2021. Adjusted PBT will be reduced by 18%-23% against consensus.
  • Estimates EPS to Feb 2020 consensus forecast is 12.4m. 20% lower would be c 10p. Dividend forecast is 7.9p which sound like it will remain unchanged.  
  • Valuation PE c 10X and yield 7.5%.  NAV 74p/share
  • Conclusion Turning a cash generative business into a growth business is a difficult path to navigate so this could be seen as “investment” but in the world of non standard lending I expect the market will take a dim view.

Non- Standard Finance– Refinance

Share Price 22p

Mkt Cap £75m

Conflict Disclosure: No Holding

  • Securitisation a new £200m securitisation facility from Ares Management Corporation will be available to fund loan book growth for the branch based lending and guarantor loans divisions. It will add £1m to PBT for the year to Dec 2020.
  • Estimates With c £21m PBT forecast this is a c 5% upgrade for 2020 and has the potential to improve the forecast 12% operating margin forecast for 2021.
  • Valuation PER 5.3X Yield 13.8%
  • Conclusion After many years of high top line growth the profitability is now starting to come through while Morses is investing in growth. The shares are the wrong price by a long way. Doubling may not be an aggressive ask.
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Mattioli Woods – Acquisition

Share Price 790p

Mkt cap £222m

Conflict Disclosure: No Holding

  • Acquisition £25.6m acquisition of Hurley, a wealth management business with pension expertise. £17.6m up front paid 60% in cash. Hurley has £570m AUM so 4.5% of AUM appears full on the face of it but up front is 3.1% of AUM and the earn out targets are undisclosed. Net assets were £2.62m PBT is £0.75m but cost savings of £0.5m are expected by the end of first year.  Revenue synergies expected through new distribution channel.
  • Estimates The deal is expected to be earnings enhancing in the first full year of ownership. With only £7m of up front share issuance up front and £1.25m of pro forma profits coming in that adds c 10% to May 2021 pre tax estimates while share issuance is c 4%.
  • Valuation PER 18.8X Yield 3.5% pre acquisition
  • Conclusion This acquisition may help towards improving top line growth which has been lack lustre. Long term this quality situation will do well but in the short term it looks up with events..  
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Quilter- FY Results

Share Price 132p

Mkt Cap £2,715m

Conflict Disclosure: No Holding

  • Results Excluding the life business adjusted PBT is up 3% to £182m. EPS down 3% to 8.6p on the back of a normalised tax charge. AUM up 13% to £110.4bn. Margin stable at 26%. Integration of Lighthouse is said to be progressing to plan. Outlook says “notwithstanding short term market sentiment” they are optimistic.
  • Estimates 9.5p of EPS for Dec 2020 is an 11% uplift from the 8.6p just delivered. This looks too high in today’s market.  
  • Valuation PE 13.9, Yield 3.8%
  • Conclusion The company has lower client retention that most at 90% on platforms and 81% for advice and wealth management which is a concern. Lighthouse was the adviser of choice at British Steel, increasing the claims risk. This is one to pass by at a reasonable distance.  

jeremy@charltonillingworth.co.uk