Hits: 17

7 April 2020

Plus 500 – Q1 Results
Share Price 1108p
Mkt Cap £1,186m
Conflict Disclosure:No Holding

• Update – Q 1 revenues up 487% to $316.6m. EBITDA $231m. That is a 73% EBITDA margin. Cash balances $515.6m. FY 20 results expected to be substantially ahead of expectations.

Estimates – The full year EBITDA estimate was for $228m and the company has delivered a little in excess of that in Q1. Forecasts have been downward sloping for 2021. I had expected that perhaps Plus may deliver 2-3X the market estimates this year but the Q1 run rate is 4X

Valuation If forecasts doubled that would equate to c 300c. That would put the shares at 4.6X.With a 60% payout ratio that would provide a yield of 13%.

• Conclusion Shares are the wrong price. Well done to the directors for buying so many.

16 March 2020

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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 200

13 February 2020

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Plus 500 – Meeting 

Share Price 911p

Mkt Cap £986m

Conflict Disclosure: No Holding

  • Thoughts I was surprised there were no forecast upgrades yesterday, particularly as more share buy backs were announced. With H2 EBITDA up 93% on H1 the 3% EBITDA growth in forecasts looks undemanding. Returning to the screen I noticed the RNS put out at 4.33 the night before results titled “Notice of EGM” was in fact a meeting to change the remuneration of the CEO and CFO. The annual bonus (up to 400% of salary so $1.94m) is determined on EPS growth. The LTIP ($285k) targets are TSR (upper quartile of FTSE 250), EPS growth (12% target), and HR.  This 12 % target compares to the 7% EPS growth being forecast this year. There is also a share appreciation right of $2.5m subject to the achievement of KPI’s “in line with UK corporate governance best practice.” I note the notice of EGM to change the remuneration is “following consultation with shareholder bodies”. Not shareholders.
  • Estimates Australia is expected to reduce at the end of this year. Perhaps 50% which could reduce revenue by 7% but when almost 7% of the market cap will have been spent on share buy backs over 12 months and you still have 23% of the market cap in cash on the balance sheet available for earnings enhancement activities. 12% compound should cause management to break sweat.
  • Valuation 36% ahead of the EPS just reported gives $1.83, putting the shares on 6.5X
  • Conclusion The EGM is in a week’s time on 20 February. We can expect the upgrades at the next update. Shareholder consultation may be more appropriate than shareholder bodies. However, in terms of making money it also means its right to invest.

12 February 2020

Plus 500 – FY Results  

Share Price 911p

Mkt Cap £986m

Conflict Disclosure: No Holding

  • Results  Results were pre announced in January which was a story of a weak H1 and strong H2 with EBITDA up 93% H2 on H1 FY EBITDA was $192.1m. Today the company annpounces it will distribute 100% of 2019 net profit to shareholders ($151m), $72m via dividend and $80m by share buy back. A new license has been obtained for the Seychelles since the year end and positive momentum has continued into 2020. The Board is confident. Year end cash was $292m
  • Estimates PBT of $190m was pre announced in January, a margin of 53% in these difficult times. Going forward a modest 10% PBT growth is expected to £203.4m. Given the H1, H2 split was $66m/$124m that would imply a H2 run rate of $248m which implies potential 22% upgrades.
  • Valuation PER on 2020 estimate as it stands is 9.7X, Yield 5.8%. IG trades at 16X and CMC at 9.8X.
  • Culture The glassdoor reviews suggest the office atmosphere is good but there are negative comments about poor customer outcomes. Exactly the reason for the regulatory clampdown.
  • Conclusion The shares are up 78% since their low last April. I am kicking myself for not owning them as it’s a question of following management purchases with this stock. The company continues to buy back their stock and there is still a way to go before they regain their £20 highs.  But it’s the porr customer outcomes that hold me back.

6 January 2020

Plus 500  – Trading Update 

Share Price 853p

Mkt Cap £930m

Conflict Disclosure: No Holding

  • Update: Revenue for the year to 31 Dec expected to be $354m and EBITDA $190m. The group refers to continues optimisation of marketing spend and looking forward to 2020 is confident of the prospects.
  • Culture The company is efficient evidenced by the being the first out some 6 days post year end with a trading update together with the 54% EBITDA margin.  The fortuitous timing of management stock sales in the past has led investors to lose faith. However management bought stock in August since when the company has bought back in excess of 4% of the share capital.  This one to follow management’s share dealing.
  • Estimates This looks to be close to consensus EBITDA which is showing as $195.8m. Going forward 3% EBITDA growth is anticipated in 2020. Given H1 2019 was $ 66m EBITDA and H2 was $124m EBITDA we can expect the numbers to be upgraded on the Q1 trading statement in April.
  • Valuation PE 8.5X yield 3.4%.
  • Conclusion It’s not too late. The shares are up strongly from the £5 low last April but have traded at £20 in the past

29 October 2019

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Plus 500 – Q3 Trading Update 

Share Price 788p

Mkt cap £874m

Conflict Disclosure: No Holding

  • Update. Trading is said to be in line with expectations for the full year. Revenue is up 10% year on year to $110.6m and up 18% sequentially. The company is now disclosing the customer P&L performance where the customers trading performance cost $3.5m in Q3 against $5.5m in 2018. The reduction in the customer acquisition cost to $921 drove EBITDA up 39% year on year to $70.1m and the EBITDA margin has reached an appetising 63%.
  • Estimates $174m PBT is expected in 2019 and guidance is unchanged today. The $70m EBITDA run rate is well ahead of next year’s forecast EBITDA expectation of $220m.  The company has only spent $14.7m of its intended $50m on share buy backs. Perhaps the upgrades will arrive once the share buy back is completed.
  • Valuation PER 8.3X Yield 6.7%
  • Conclusion Perhaps this isn’t one that investors are comfortable with for the medium term but it has proved to be a very good trading stock. The directors bought heavily earlier in the year. The company is now buying and it looks like we may enter an upgrade cycle as the comparators get easier. It is not too late.

23 August 2019

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Spread Betters 

  • Regulatory contagion was confirmed yesterday with the Australian regulator proposing new rules very similar to those that ESMA introduced this year causing significant loss of revenues for the spreadbetting companies. IG Group stated it would make no difference to their 3-5% underlying growth guidance. Plus 500 stated that Australia represented 15% of their CFD trade while CMC stated it was 17% on their net operating income.
  • Estimates CMC managed to slip into their statement that current trading is ahead of expectations. The recent director purchases of Plus 500 also add confidence.
  • Valuations Plus 500 trades on a PER of 7.1X and yields 8.5%, while CMC trades on 12.2X and yields 4.5% while IG Group ( which I hold) trades on 13.7X and yields 8%.PER is 15.3X falling to 12.8X after bank application costs or 10.6X falling to 9.3X before bank application costs. July NAV is forecast to be £14.9m so this is a 7% premium to book value.
  • Conclusion Plus 500 and IG are aiming for market share gain in this new environment.  This may not be good for next year’s profitability but humans will continue to bet and these companies will emerge stronger in the medium term as they build new products and gain market share.

13 August 2019

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Plus 500 – H1 Results 

Share Price 571p

Mkt Cap £647m

Conflict Disclosure: No Holding

  • Results Revenues down 42% to $148m. EBITDA down 58% to $65.6m. EPS dps 56% to $0.45. Cash up 4% to $327.3m. ARPU down 42% to $1,044 and customer acquisition cost also down 30% to $1,079. Dividend also down 56% to $0.2734/share.  Importantly Q2 is 23% up on Q1 in terms of new customers and 11% up in terms of active customers, while non EEA countries is now 48% of revenue. While trading is reported to be in line with expectation the outlook is optimistic and the company announces a $50m share buy back
  • Estimates No change given trading is reported to be in line. $180m pre tax anticipated for 2019 which is cents 123 EPS. New 60% payout policy may bring dividend expectation down from 80c to 74c.
  • Valuation PER 5.6. Yield 11%
  • Conclusion The shares are likely to move better as the dust settles post the regulatory changes. H1 has also been a time of low liquidity in markets generally so we can anticipate some more upbeat news over the next 6 months.  Probably a good trade from this level.

17 July 2019

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Plus 500 – Consolidation 

Share Price 656p

Mkt Cap £743m

Conflict Disclosure: No Holding

  • News Betaville reports yesterday that Gain Capital (+26%) has received an offer from Plus 500. Gain Capital, listed in the US has a market cap of $185m and is forecast to lose $25m in 2019 before turning a profit of $27m in 2020.
  • Numbers With £315m cash on Plus’ balance sheet this could be perhaps 10% earnings enhancing in 2020 for Plus.
  • Valuation PER 5.5X and yield 11%.
  • Conclusion Normally when a market is in a state of change it is a useful thing to do to consolidate competitors. However Plus’ valuation tells us the cash could better be used by taking the company private.  It was the very large bonuses paid to management last year which makes me think the company is unlikely to become investable again. Shareholders would be better served by a take private.

1 July 2019

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Plus 500 – H1 Trading Update 

Share Price 539p

Mkt Cap £611m

Conflict disclosure: No Holding

  • Update – Trading is in line with expectations.  After a quiet Q1 revenue in Q2 increased from $53.9m to $94m giving $148m for H1. 48% revenue from outside the EEA while 23% was from professional clients.
  • Estimates –. FY 19 revenue is expected to be circa $367m so with 40% delivered in H1 and an upwards trajectory that looks reasonable.  
  • Valuation Per 5X yield 12%.   
  • Conclusion  The valuation is hugely persuasive. If the dividend isn’t increased for 8 years you get your money back.  But with less professional clients than comparators such as IG the future remains uncertain. I think they will recover well, but confidence levels in that are low.  

12 February 2019

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Plus 500 – FY Results 

Share Price 1636p

Mkt Cap £1.86bn

  • Results Revenue up 65% to $720m. EBITDA up 95% to $506m, equating to a 70% operating margin. EPS up 90% to $3.33. Net cash up 78% to $315m. DPS up 18% to £2. Australian revenues increased four fold and Singapore has launched. Q1 2019 has traded above Q4 18 which was the quietest quarter following the ESMA rule changes. The company is confident it can continue to develop the business and expand into new geographies to provide strong shareholder returns.
  • Estimates The company says their latest assessment of the ESMA regulations means revenue is expected to be lower than current market expectations while their decision to maintain marketing spend profit will be “materially” below expectations. Expectations currently are for a 23% reduction in revenue but the company has just beaten the revenue expectation by 3%.  PAT was expected to decrease by 27% so this looks potentially a 30-40% reduction.
  • Valuation PER is 9 before downgrades which may be 10-20%. Yield 9%
  • Conclusion This stock is perhaps the best trading stock for those with nerves of steel.  The year just gone has beaten expectations while the year ahead will be below expectations. One to buy when its hated. Expect it to move lower today when it could get interesting. For now it looks like the party is over. One to buy on the hangover.