PLUS/RIV/JTC

Hits: 39

A little information overload going on at the moment. Sometimes doing nothing is hard.

  • P2P Ratesetter tells investors withdrawals are taking longer due to a spike in demand.  Assetz Capital has stopped investors making withdrawals. Funding Circle, however, is praised in the trade press for continuing to lend while some have stopped lending to the food, hospitality, travel, transport, supply chain and freight sectors.
  • Randall & Quilter announces a £2m buy back of shares.
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Plus 500 – Trading Update

Share Price 775p

Mkt Cap 833m

Conflict Disclosure: No Holding

  • Update Continued significantly higher levels of trading. As well as this the company has experienced gains from customer trading. The statement says it is early in the year so uncertainty over the outcome remains difficult to predict but revenue and profitability expected to be “significantly” ahead of expectations.
  • Estimates “significantly” may suggest 10% ahead.  So $176m pre tax may be closer to £200m. But going forward forecasts anticipate little growth over 2021 and 2022 currently. The reality should be the shapes of a hill with a far higher number this year then declines as volatility does down.
  • Valuation PER 7.7, yield 6% pre upgrades.
  • Conclusion The shares have fallen 20% in March while the trading performance is a good market hedge. If the current EPS forecast of 123 cents was in reality closer to 200c and the shares were on 8X the share price would be 1290p.
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River & Mercatile – H1 Results

Share Price 212p

Mkt Cap £181m

Conflict Disclosure: No Holding

  • Results Over the 6 months to December AUM was up 6.2% to £42.3bn. Investment performance was strong adding 1.8% over the 6 months. Underlying revenues grew 7% to £35.3m while performance fees fell from £6.5m to £1.1m resulting in revenue falling 7% to £36.3m.  Investment in the business increased the cost base so EPS was down 28% to 7.29p. The business is operating a split team programme for the virus and the outlook says they are well positioned to help clients through these difficult times.
  • Estimates June 2020 forecasts anticipate 17.7p EPS. With 41% of this delivered in H1 this is too high.  It may be difficult to repeat the H1 performance with lower markets but conceivable the shares could be priced off 10-15p EPS.
  • Valuation If it was priced off 10-15p EPS the shares could be 120-180p. But there is yield support. The H1 dividend is 4.39p, of which 0.5p is performance fee. Last year’s second interim dividend ex performance fee was 2.6p and final was 2.6p.  That makes a management fee dividend of 8.8p if H2 was in line with last year’s. A 6% yield would imply 150p
  • Conclusion The profits will be hit like most fund managers. Just as the company is set to benefit from investing through its P&L it takes a revenue hit. With £26m cash it has a strong balance sheet and is one to own if we have any possibility of knowing how bad the market can get.
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JTC  – Acquisition

Share Price 406p

Mkt cap £463m

Conflict Disclosure: No Holding

  • Results. Acquiring the business and assets of Sanne’s private client business in Jersey. Price is capped at £12m payable in cash at completion. That is 2.3X the £5.3m revenue and it is expected to be immediately earnings enhancing wit the transaction delivering at least JTC group wide EBITDA margin of 33%. That implies an EBITDA multiple of 6.8X
  • Estimates EBITDA for Dec 2020 is expected to be £30.5m, so potentially this could add 5-6%
  • Valuation PE 19.2X yield 1.3%
  • Conclusion Transaction looks usefully priced and sensible. But these shares are expensive and this is one of those stocks where I suspect the high organic growth number is in reality cross selling services which when acquisition stop so will organic growth, making it a very dangerous stock for the medium term .

jeremy@charltonillingworth.co.uk