The Financial Grimes: 9 July 2019

This top City analyst reviews the financial sector stocks making headlines today.

• Keystone Law (LSE:KEYS) have their AGM today but no statement.

Knights Group – FY Results

Share Price 268p

Mkt Cap £196 million

Conflict Disclosure: No holding

Knights Group (LSE:KGH) is a UK law firm.

• News First post IPO results show revenue up 51% to £52.7 million and EBITDA also up 51% to £11.3 million. PBT £9.8 million and EPS up 55% to 11.88p. Net debt £14.1 million. Average fee per earner up 22% to £131k. Outlook refers to a good start to year and confident of delivering continued growth. The company completed four acquisitions in the year and has a "healthy" pipeline.

• Estimates The 21 May trading update said Adj. PBT expected to be slightly ahead of market expectations.

• Valuation PER 16.5X yield 1.2%. ROCE is c 15%.

• Conclusion With an enormous arbitrage between private company acquisition prices and quoted valuations, I suspect there are a good few years of strong share price performance to be enjoyed by shareholders, until valuations become high at which point greed usually spoils it. That's a long way away yet.

Premier Asset Management – Trading Statement

Share Price 200p

Mkt Cap £205 million

Conflict Disclosure : No Holding

Premier Asset Management (LSE:PAM) is a fund manager.

• Statement  After 23 quarters of net inflows modest net outflows of £55 million have been experienced. 12 month net inflows look healthy at £133 million. AUM was £6.7 billion (March 19 £6.8 billion)

• Estimates A modest decline in revenue to Sept 19 is forecast which does produce a 16% PBT increase to £18.6 million. EPS 14.4p and Dividend 10.3p

• Valuation EV/AUM 2.7%. PER 11.4X Yield 6.1%

• Conclusion Shares are down 28% over 12 months, indicating the weaker performance has been anticipated.  Even Jupiter (LSE:JUP) is now trading at 14X. As soon as some better fund performance is posted I expect the shares will bounce back strongly. In the meantime it must be very sad to break a 23 quarter run of inflows.

Begbies Traynor – FY Results

Share Price 74p

Mkt Cap £84 million

Conflict Disclosure: No holding

Begbies Traynor (LSE:BEG) is an insolvency expert and corporate restructuring specialist.

• Results Revenue is up 15% to £60.1 million. Adjusted PBT up 27% to £7.1 million and EPS 4.9p. DPS is 2.6p, while net debt reduces to £6 million (2018 £7.5 million). Outlook refers to good momentum and being confident to deliver market expectations. Property services is now 30% of the operating profit where the margins are a little higher than the recovery and financial advisory business. Before overheads, the margin is 21%.

• Estimates Revenue is expected to grow a modest 7% to £64.4 million in the current year, which translates to 19% PBT growth to £8.4 million and EPS of 5.5p.

• Valuation PER 13.4X Yield 3.8%

• Conclusion Last year the insolvency market grew 10% and I rather fancy the market for this year.  So we may have upgrade potential.  The ROE remains a lowly 8.5% and earnings need to grow significantly for this to become more highly rated, which is not being forecast. So there may be upgrades, but upside looks modest for a £85 million market cap company.

Finncap Group – FY Results  

Share Price 24.5p

Mkt Cap £41 million

Conflict Disclosure: No holding

Finncap (LSE:FCAP) provides financial services expertise to smaller public and private companies. It specialises in corporate finance and broking, equity sales, trading and market making and research. 

• Results PBT up 41% to $4.29 million and EPS up 29% to 2.86p.  Cash was £4.7 million and tangible net assets £14.9 million.  Outlook says continued to trade profitably with a healthy pipeline.

• Estimates None

• Valuation  8.6X historic PER. Dividend is 0.355p which is a 1.5% yield

• Conclusion Comparators such as Arden and Cenkos trade at a discount to cash. Cavendish is a lumpy business which is why it was acquired cheaply.  They could land some larger deals but I am not sure that justifies the rating.

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.