Hits: 15

24 July 2020

Nucleus Financial -AuA update

Share Price 129p

Mkt Cap £99m

Conflict Disclosure: No Holding 

  • Results 1.2% net inflows in the quarter to June combined with a 11.9% market tailwind to lift AuA 13.1% to £15.8bn. Net inflows are lower than Integrafin’s 2.3% during the quarter.
  • Estimates Forecasts to December 20 are predicated on flat revenues while AuA are 3.2% up at the end of H1 which looks comfortable 
  • Valuation PE 30X compares to Integrafin’s 42X
  • Conclusion These stocks are all very expensive for what doesn’t look like an accelerating market over the past 3 years (see below)
  • Unlike fund managers whose flows don’t seem to be in decline

31 January 2020

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Nucleus Financial Group – Q4 AUA Update 

Share Price 175p

Mkt Cap £134m

Conflict Disclosure: No Holding

  • Update Net inflows were 1% in the quarter to December which compares to Integrafin at 2.5%. Over 12 months AUA are up 16% to £16.1bn.  . The statement says the inflow improvement in Q4 has continued into the new year and the company continues to invest in the platform.
  • Estimates Anticipate an 11% revenue increase  significant increase in 2020 which looks about right with AUA 16% up on a year ago.
  • Valuation PER 24.7X Yield 2.8%. Integrafin trades on 35.5X.
  • Culture A reasonable Glassdoor score of 3.9. The largely positive reviews such as “Wold in Sheeps clothing” is let down the occasional staffer who says it can be “soul destroying”.
  • Conclusion For the long term investor the compounding effect of Integrafin’s superior flows is more important than the premium rating. I sense the company needs more differentiation as I am struggling for a reason to own it other than rising tides lifting all boats.

25 October 2019

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Nucleus – AUA update 

Share Price – 144p

Mkt cap £110m

Conflict Disclosure: No Holding

  • Update Net inflows were 0.7% in Q3 but market help lifted AUA 2.3% to £15.55bn. Average AUA is up 6.6% for the 9 months of 2019 year on year. The statement says they are hopeful of negotiating a partnership with an IFA consolidator but IFA consolidation remains a headwind accounting for the higher than normal outflows.
  • Estimates In H1 the company reported 6.9% AUA growth and 4% revenue growth. Fy estimates are predicated on 6.9% revenue growth which looks reasonable.
  • Valuation PER 19.8X Yield 3.5%. Integrafin trades on 35X and yields 2%.
  • Conclusion Flows are likely to be inferior to those of Integrafin over the long term as this company is more exposed to IFA consolidation.  Integrafin AUA was up 14% over the year at 30 September. The difference in rating’s would be caught up after 8 years of AUA growth differential, but the operational gearing means it would be considerably shorter in profit terms.  Struggling to understand why to own this one.

10 September 2019

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Nucleus- H1 Results 

Share Price 157p

Mkt cap £120m

Conflict Disclosure: No Holding

  • Results Revenue up 4% to £22.1m which is derived from AUA up 6.9% and a modest reduction in revenue yield from 30.8bps to 30.2bps. PBT declined 7.3% from £4.9m to £4.6m as the EBITDA margin fell from 23% to 20.7%. The outlook refers to replatforming disruption amongst competitors and says that financial performance is expected to develop as planned. The company expects to deliver operating leverage over time.
  • Estimates FY PBT estimates at £6.8m, EPS 7.3p
  • Valuation PER 21.6X Yield 4%.  I guess AJ Bell trades on 53.6X while Integrafin trades on 34.1X. Just their flows aren’t quite as good.
  • Conclusion These results look lacklustre. The flows may be lower than peers as investment has gone in in H1. The peers of AJ Bell and Integrafin are hugely expensive. I wonder if the cheaper play on the market drivers would be Tatton Asset Management.

26 July 2019


26 July 2019

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Nucleus Financial – AUA Update 

Share Price 179p

Mkt Cap £127m

Conflict Disclosure: No Holding

  • Update Customer numbers up 5.5% over the 3 months to June resulted in AUA up 6.9% to £15.3bn.  Net inflows were 0.7% of the 5.5% increase over the period. Flows are a little behind AJ Bell’s 2.5% but AUA increase is in line with AJB’s 7%.
  • Estimates anticipate a modest reduction in revenue but a 15% PBT increase to £6.5m. With AUA up 6.9% year on year this looks very comfortable 
  • Valuation PER 25.9 is a lot less than AJB on 57.1. Yield 2.8%
  • Conclusion The premium for the market leader is huge. This looks good value in comparison.

2 April 2019

Nucleus Financial – FY Results 

Share Price 172p

Mkt Cap £131m

Disclosure- No holding

  • Results Average AUA up 13.5% delivered revenue growth of 9.6% on the back of a 3.2% blended revenue yield reduction. Adjusted EBITDA was up 32.9% delivering a 20.8% margin. EPS up 16.7% to 6.3p (2017 5.4p) and the dividend was 3.9p per share, a 62% payout ratio. The outlook says the company is confident in their ability to deliver on future plans.
  • Estimates For the year ahead expectations are for 5% revenue increase and 10% EPS growth following market declines in Q4 so that AUA was up over 2018 only 2.3%. Strong markets in Q1 2019 should make this very undemanding.
  • Valuation PER 24.9, yield 2.7% which is 3.2X sales. Integrafin, which makes a 50% operating margin trades at 28X and yields 2.3% which is 12.6X sales.
  • Conclusion This looks quite pricey for 10% growth while pricing pressure is unlikely to reduce. And the PER differential is modest between Integrafin and Nucleus. Struggling to see any excitement here.

26 October 2018

Nucleus Financial Plc – Q3 update 

Share Price 161p

Mkt Cap £123m

·         Update 2% net inflows over the quarter to September which with help from the market increased AUA by 2.4% over the quarter. This is a slow down from net inflow rates in 2017 which is in tune with what others are reporting. By way of comparison Integrafin reported net inflows of 3% over the quarter. This could get competitive.

·         Estimates Forecasts anticipate 10% revenue growth in the year to Dec 18 to £44.6m which gives £7.3m PBT. Average AUA was up 15% Q3 18 on Q3 17 so that looks conservative (which given markets are now falling is useful)

·         Valuation EV/AUA is 0.74%, PER 21 (Dec 18) and yield 2.9%. Integrafin trades at an EV/AUD of 2.4% which is a PER of 23 on September 19 estimates

·         Conclusion The valuation differential from 0.7% to 2.4% AUA for Integrafin is a function of Integrafin making 49% operating margin while Nucleus makes a 15% operating margin.  Platforms is a scale game and either Nucleus will grow or Integrafin will acquire it.  Both are good for shareholders.

11 September 2018

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Nucleus Financial – H1 Results  

Share Price 210p

Mkt Cap £160m

·         Results AUA was up 15.6% over 12 months to £14.4bn driven by net inflows of 5.9% over the 6 month period. Revenue grew by 11% to £21.6m as the revenue yield declined from 33.3bps to 31.5bps. Adjusted EBITDA was up from £1.98m to £4.9m achieving a 22.4% adjusted operating margin but like SimplyBiz they have stripped out share based payments. Excess capital is £6.7m while NTA is £15.7m. The outlook expects higher margin despite pricing pressure

·         Estimates. There are no market forecasts out yet. However I note that Integrafin is expected to make a 48% operating margin this year while Nucleus has delivered 22%.  

·         Valuation With Integrafin trading at 33X 2018 estimates and this company expected to grow faster the business is valuable.  If it delivered £9m PBT (calculated as 2X the H1 profit) and we put it on a 25X multiple the market cap would be £180m or 13% upside

·         View I suspect this agile company with strong IT could deliver impressive growth going forward and looks reasonably priced.  But I also wish they didn’t strip out share based payments in their adjustments.