Hits: 22

3 July 2020

Numis Corp- Q3 Update

Share Price 312p

Mkt Cap £330m

Conflict Disclosure: I Hold

  • Results We don’t usually get quarterly updates from Numis. Equity raises have been materially higher as have trading gains on the book. With a strong pipeline the company expects revenue and profits in H2 to exceed H1.
  • Estimates Revenue to September 20 is expected to be £125m which implies £62m in H2 compared to £63m in H1. Perhaps this is 10% light.
  • Valuation 12p EPS for the full year could in reality be 15p. If that was the case the shares trade at 20X
  • Conclusion As with the spreadbetters this is a play on earnings rather than valuation. With a strong market background the shares are anticipating earnings surprise. The joint CEO’s may yet have a chance to achieve their maximum LTIP targets which is based on a share price above £5 by 2021.

12 May 2020

Numis – H1 Results

Share Price 273p

Mkt Cap £291m

Conflict Disclosure: I Hold

 

  • Results Revenues were marginally higher than the 10% guided at the pre close growing 13.3% to £63.1m and operating profit was 12.4% up to £9.1m. EPS up 11.2% to 6p and interim dividend of 5.5p to be paid in June. Net cash £96m. Corp clients down from 214 to 209 but rev/head up 12% to £449k. The outlook says they have seen an uptick in companies requiring funding due to balance sheet stress.

 

  • Estimates There are no forecasts but historically Numis made £38m PBT in 2017 before Brexit combined with a cost increase to make £12m in 2019.

 

  • Valuation The 12p dividend looks safe which provides a 4.4% yield while the shares trade on 28X historic earnings.

 

  • Conclusion This appears expensive but the earnings are volatile. With an uplift in fundraising ahead and the CEO’s incentivised to a 509p share price by 2021 I am hoping the joint CEO’s do well. To make 50p EPS would require PBT of perhaps £70m which almost double the 2017 result. Possible but it would be a good year.

14 April 2020

Numis– Opportunity

Share Price 232p

Mkt Cap £246m

Conflict Disclosure: No Holding

 

  • Thoughts –. While fishing errant sausages out of barbecue coals over the week end I found myself pondering exactly how much profit Numis could make in the COVID refinancing boom.

 

  • Estimates – In 2007 Numis delivered £40m PBT from 109 corporate clients with an average market cap of £195m and 186 staff. . Today it has c 217 corporate clients with an average market cap. Of £888m and 277 staff. With more than double the number of corporate clients at on average 4.5X the market cap it may be reasonable to assume that in a refinance boom the profits should be at least double the previous cycle and more likely 4-6X.

 

  • Valuation 2-6 X 2007 profits would equate to 58p-170p/share EPS implying a PE of 4X-1.3X

 

  • Conclusion The shares have fallen 20% on the back of COVID which is presenting the company with a huge opportunity. In particular the joint CEO’s have an incentive scheme that gives them a £15m bet that the share price gets to 509p by 2021. They could well achieve that.

30 March 2020

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Numis – Trading Update 

Share Price 206p

Mkt Cap £219m

Conflict Disclosure: No Holding

  • Update  -H1 revenue to March 2019 expected to be 10% u year on year. Investment Banking revenues marginally below prior year but equities more than offset this. Trading book delivered gains materially ahead of prior period. Too early to predict a recovery in investment banking pipeline
  • Balance Sheet – Cash was £84.2m at the FY results in September and the current balance is reported to be “higher”. Net asset value £138m.  
  • Valuation – Price/Book value 1.6X.
  • Conclusion – Once this is over there is going to be a lot of rescue rights and placing. This could do well. And Cenkos also trades at a 27% discount to NAV.

4 February 2020

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Numis – AGM 

Share Price 289p

Mkt cap £308m

Conflict Disclosure: No Holding

  • Results  Revenue is in line with management expectation and “materially” ahead of last year. Transaction volumes in the first 4 months of the year are in line with the prior period but the pipeline sounds swollen. Private Transactions are said to have delivered a meaningful contribution. Oultook is “well placed”
  • Estimates September 20 revenues are expected to be 12% higher at £125m with EBIT of £20.6m which is considerably lower than the £34.8m delivered in 2017.
  • Valuation The PER of 25X is anticipating better earnings. Yield 4.2%
  • Culture With a generous incentive plan incentivising the joint CEO’s against share prices from 209p to 509p it is surprising to see such a high employee review score of 4.7 on Glassdoor.
  • Conclusion It will probably have a good year like K3. The shares are up 27% since the November low. There is more money to be made from K3.

4 December 2019

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Numis – FY Results 

Share Price 237p

Mkt Cap £248m

Conflict Disclosure: No Holding

  • Results Revenue down 18% to £111.6m and PBT down 60% to £12.4m. EPS down 65% to 8.8p. Net assets down 3.5% to £138m. Corporate clients up 7 to 217, revenue per head was £404k and operating margin was 12.6%. Outlook “well positioned”
  • Estimates Revenue and PBT looks in line with previously guided forecasts. Understandably there is no current year forecast. It would be wrong.
  • Valuation PER 10.8X, Yield 5.1%
  • Conclusion With the highly volatile profit stream this is one to buy in difficult markets and sell in bull markets. Unless brokers are in structural decline (debate). My guess would be that fund raising on markets will increase once the private unicorn valuations have come to an end and this is an opportunity.

3 May 2019

Numis – H1 Results 

Share Price 265p

Mkt cap £282m

Disclosure: No holding

  • Results – Revenue down 25% to £55.7m and PBT down 64% to £7.1m. EPS down 66% to 5.4p. Cash 4% lower at £78.9m and net assets flat at £140m. Corporate clients increased from 208 to 214 with an average market cap of £836m.

Capital markets revenues (fund raising fees) were 45% of the total revenue while retainers were 11%.  Staff costs were down 29% despite the headcount increasing 10% to 279. The outlook refers to expecting a material improvement once greater political clarity is established. “Well positioned”

  • Estimates Full year forecasts to September are for £119.7m revenue (2018A £136m) and £21.6m EBIT (2018 A £29.9m). This looks like it will need a strong recovery to achieve these numbers.
  • Valuation PER 17.7 Yield 4.3% Price/Book 2.1X for 12% ROE
  • Conclusion Valuation is factoring in a recovery. Looks too high to me.

29 March 2019

Numis – Trading Update  

Share Price 255p

Mkt Cap £272m

Disclosure: No holding

  • Update H1 revenue to March is expected to be 26% lower than last year despite some recent notable fund paises for Just Group, Randall & Quilter, Primary Health Properties and Medic X. Equiteies trading revenue is down while the transactions have been fewer with larger average deal sizes..
  • Estimates Forecasts are currently for a 10% reduction in revenue for the year to September 2019 to £125m  A 26% reduction in revenue would imply c. £55m revenue in H1 leaving £70m to make up in H2. Possible.
  • Valuation PER is 11.1X 2019 and yield 4.7%. 
  • Conclusion Markets have been poor with a number of IPO’s currently waiting in the wings.  If markets improve post the current donturn in the yield curve Numis could make up the lost ground quite quickly.  It is possible this could be an opportunity for investors.  

5 February 2019

Numis – AGM trading Update 

Share Price 273p

Mkt Cap £292m

  • Update – Things have been tougher. Broking and Advisory revenues are below the prior year since September. Dealing transactions are down 25% and Equities revenues are down 25%. This comes after a year when the company increased the headcount 16%. The pipeline going forwards is however “strong”.  This should be a standard line in every brokers results statement. No mention was made of the underwritten Kier placing which will have cost them in H1.
  • Estimates Forecasts look for a 9% decrease in revenue and a 20% decrease in PBT for the current year to September. In the light of the weak trading so far this looks too high.  Perhaps the £25m PBT estimate should be closer to £20m.
  • Valuation PER 12 and yield 4.4%.  Last year the total cost base was £106m. This should be able to support a £50m profit number in strong markets and this is a highly cyclical company.
  • Conclusion This is a market play and it is a guess on where markets go. Buying off say a £20m profit estimate that could grow strongly is a time it looks interesting. It certainly has a long term franchise with 210 corporate clients. The shares are 38% off from their highs.

5 December 2018

Numis FY Results  

Share Price 277p

Mkt Cap £292m

  • Results5% revenue growth to £136m and following a 15% increase in the headcount a 17.4% reduction in PBT to £31.6m. EPS down 8.4% following share buy backs to 25.1p. Net assets £143m of which cash is £111m. 210 corporate clients with an average market cap of £829m. Outlook refers to more challenging markets in recent months.
  • Estimates Results are in line with the market estimate although EPS is a little ahead as the share buy backs have enhanced earnings . Going forward there is scope to increase the 25.8p EPS forecast although markets are harsher
  • Valuation PER 10.7X. Yield 4.3%
  • Conclusion Numis’ ROE is a healthy 28% due to its market leading position. The company is keen to point out Mifid 2 has had little effect.  And it looks cheap. However, I worry that the UK market may move towards the US model where companies employ investor relations consultants increasingly which may structurally put pressure on the primary fees that these businesses are so reliant on.  And with a high cost model this could leave the businesses exposed.

28 September 2018

Numis – Pre Close Update  

Share Price 374p

Mkt Cap £396m

·         Statement – Revenue weaker in H2 than H1 but up 3% for the full year. Pipeline encouraging. Headcount has grown 16% over the year so with staff costs significantly up profits are expected to be down.

·         Estimates  The market estimate which was previously provided by Edison was for £144m revenue. A 3% increase on last year would imply £134m revenue so the pipeline they mention could be £10m of fees slipped to after the period end.  The profit forecast was £37.8m against last year’s £38.3m. Given a shortfall at the revenue level and a 16% headcount increase this looks too high.

·         Valuation PER pre downgrade is 14X and yield 3.2%.

·         Conclusion Share will come back but the power of momentum which Numis has will continue. Could be an opportunity. It wont help the sale of Peel Hunt who reported a profit of £26m in the year to March 2017 to Santander.