The Financial Grimes: Chance to own two cheap shares

by Jeremy Grime, an ii contributor |

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

  • Morses Club (LSE:MCL) 20 million shares printed in home-collected credit business Morses Club last night at 138p. On a single figure PER and a yield of 6.3% I suspect the buyer will find a very satisfactory outcome.
  • Gresham House (LSE:GHE) The Energy Storage fund announces a placing to raise £49.7 million. Note that forecasts for the fund management group assume no increase in AUM this year.

Liontrust  – Trading Statement    

Share Price 772p

Mkt Cap £392 million

Conflict Disclosure: No Holding

Liontrust Asset Management (LSE:LIO) is a fund manager.

  • Statement AUM up 11% over the three months period to £14.1 billion consisting of net inflows of 5.7% and 5.3% performance. 49% AUM is now economic advantage and 30% sustainable investment process. One-year fund performance is generally strong too. Outlook is "well positioned".
  • Estimates Forecasts look for 10% PBT growth to March 2019 which looks rather too easy to achieve when you do 11% AUM growth in Q1.  
  • Valuation PER of 13.9X and yield of 4%. EV/AUM 2.5%.  
  • Conclusion The shares are cheap because of concentration risk. Opportunity.

Polar Capital – Trading Statement    

Share price 580p

Mkt Cap £559 million

Conflict Disclosure: No holding

Polar Capital (LSE:POLR) is a fund manager.

  • Statement AUM up 6.4% over the three months comprising net inflows of 1.1% and 5.3% performance.
  • Estimates AUM is now back to where it was in September 2018 at £14.7 billion. Pre performance fees to March 19 the company made £42.2 million PBT, which is forecast to be £53 million for the year to March 20.
  • Valuation PER 13.6, yield 5.8%. EV/AUM 2.8%
  • Conclusion The shares are cheap on earnings forecasts that are about right. Liontrust has £14,097 million AUM and can be bought for £392 million, while Polar has £14,712 million and can be bought for £559 million .
Glossary
PBT profit before tax
EPS earnings per share
DPS dividend 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, and 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.

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