The Financial Grimes: 20 June 2019
This top City analyst reviews the financial sector stocks making headlines today.
20th June 2019 10:23
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 asDirector of Researchat 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 clickhere.
STM Group Plc – Operational Update
Share Price: 48p
Mkt Cap: £28 million
Conflict disclosure: I hold
STM Group (LSE:STM) runs an offshore pension scheme and international SIPP used by UK expats.
As this business becomes increasingly UK-centric it will become more investable. The short-term downgrade for extra infrastructure will also help the future prospects, while the strong balance sheet will enable the company to benefit from further acquisitions. Today's statement reiterates their acquisitive ambitions.This could turn into a swan.
News – There are a number of one-offs. Negative goodwill of £2.7 million on the Carey Pensions SIPP business is accompanied by integration costs of £0.5 million in 2019, but £0.7 million of cost savings will benefit 2020. A new Target Operating Model has been adopted together with new Non-Executive Directors (NEDs) for the model which will also add £0.5 million operating costs "in the short term".The exit from the insurance management business will also incur a £0.7 million goodwill write down. The Carey business is gaining more new business in the corporate sector and will be centred in Milton Keynes.
Estimates – At the underlying level, the extra operating costs for the new target operating model sound like we may have a £0.5 million downgrade for 2019. But the prospects for 2020 sound quite exciting, with a faster growing UK pensions business centred out of Milton Keynes.Forecast for 2019 are for £4.1 million pre-tax which may therefore come down, while the £4.4 million for 2020 looks safe.
Valuation - PER is 8.8X and yield 4.2%.
| 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 atjeremy@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.