The Financial Grimes: 19 June 2019
This top City analyst reviews the financial sector stocks making headlines today.
19th June 2019 09:02
by Jeremy Grime from ii contributor
Share on
This top City analyst reviews the financial sector stocks making headlines today.
Jeremy Grime spent 15 years as a financial sector analyst, working at Altium Capital, RBC Capital Markets, Panmure Gordon and most recently as Director of Research at finnCap. Jeremy is also a qualified accountant.
Jeremy’s blog is written with more experienced investors in mind. However, we have included a brief glossary at the bottom of the page to help those less familiar with some of the language used. For more on key financial metrics and valuation ratios click here.
Clear evidence emerged yesterday of how much markets worry about trade wars (see Dow Jones index chart below).
Mattioli Woods (LSE:MTW) completes the cancellation of the option to acquire 51% of Amati in return for £750k payment. The sacrifice of value to maintain strong performance underlines the exceptional culture in this company.
Randall & Quilter – CEO change 
Share Price: 175p
Mkt Cap: £350 million
Conflict disclosure: I hold
Randall & Quilter (LSE:RQIH) is a specialist non-life Legacy insurance investor
Ken Randall recently sold 3 million shares at 185p and still holds close to 6% of the company. As the architect of the new simplified strategy the market may need some convincing that joint CEO's is the right solution to succession. Looks like this could be listless until the results prove the positive outcome later this year.
News – Ken Randall is stepping down as CEO and becoming executive chairman. Roger Sellek and Alan Quilter are to become joint CEO's
Valuation - PER is 10X and yield 5.35%. There is no trading update, but the company was on track to achieve £600 million of program business by the end of this year, which could potentially represent £30 million of revenue with little marginal cost. The NAV of the insurance business is £175 million.
Saga – AGM 
Share Price: 38p
Mkt Cap: £421 million
Conflict disclosure: No Holding
Saga (LSE:SAGA) offers products and services like insurance and holidays exclusively for the over 50s
This rating has to look interesting. Debt is £322 million which is not too high given £100 million plus of profits. The problem is that warnings normally come in three's because of the human trait of denial. The dividend has been cut and the recovery plan is visible. I could get excited about the savings products, while the direct insurance broking model may alienate some brokers. I suspect we may be somewhere close to the trough.
Statement - Trading is "broadly in line" with expectations. In the largest business, insurance, broking volumes are down 6.5%, while gross margins are in line with guidance at £71-£74/ policy. Tour Operations booked revenues are down 4%, while cruises are more resilient, although a £3 million loss is expected from cruises. The savings business will launch in the autumn.
Estimates - On April's warning the company said it expected profits to be £103-£120 million and consensus seems to be at £110 million. "Broadly in line" suggests £105 million.
Valuation - PER is 4.5X and yield 10%
| Glossary | |
|---|---|
| PBT | profit before tax |
| EPS | earnings per share |
| ROE | return on equity |
| EBITDA | earnings before interest, tax, depreciation and amortisation |
| PER | price earnings, or PE ratio |
| Yield | dividend yield |
| FCF | free cash flow |
| NAV | net asset value |
| Price/Book (PB) | a company's share price versus what it owns |
| Book Value | a company's worth after subtracting debts and liabilities from assets |
| AUM | assets under management |
| FUM | funds under management |
| OTC | Over-the-counter |
| FCA | Financial Conduct Authority |
| ESMA | European Securities and Markets Authority |
For information about Jeremy's 'deep dive' company analysis, you can email him at jeremy@charltonillingworth.co.uk
Jeremy Grime is an independent equity markets analyst and freelance contributor, not a direct employee of interactive investor.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.