This top City analyst reviews the financial sector stocks making headlines today.
Enjoyable Brexit rhetoric in Wetherspoons' (LSE:JDW) update today. There are only two lines on the company's "unchanged" trading.
Alpha FX – Trading Statement
Share Price 725p
Mkt Cap £269 million
Conflict Disclosure: I Hold
Alpha FX (LSE:AFX) helps companies and institutions manage their foreign exchange exposure.
- Statement Revenue for H1 expected to be £15.6 million, a 60% year on year increase. Driven by Core UK corporate as well as Europe revenues accelerating from the London-based team. Canada is yet to contribute meaningful revenues, but the company is confident. Alpha pay, launched in Dec is "well received". The office move will increase costs but earnings are expected to be "ahead of expectations"
- Estimates Full-year revenue expectations are £29.2 million. 53% of this has been delivered in H1 and, with a 60% year-on-year growth rate, there is considerable scope for upgrades.
- Valuation With a PER of 33.8X and yield of 0.9% the price is anticipating upgrades.
- Conclusion The ROE is 21% and the company's embedded and recurring revenues, which are growing fast, makes me suspect this is a company that could sustain a high rating as successive upgrades are delivered. The shares have come back since Argetex came to market at a far lower valuation, but Argentex is "advisory" forex.
Equals Group (previously FairFX) – Trading Statement
Share price 125p
Mkt Cap £205 million
Conflict Disclosure: No holding
Equals Group (LSE:EQLS) is a low-cost payment services provider.
- Statement Turnover up 17.5% year on year to £1.3 billion with some margin improvement. The corporate expense product grew 34.7% and international payments grew 14.4%. Travel money was down 8.9% as the group cancelled some low margin travel cash affiliate partnerships. Banking turnover rose 36.7% to £358 million on the back of improved technology and the new credit broker license. The company is confident it will achieve full-year expectations
- Estimates Full-year estimates are for £10 million PBT and £32.6 million revenue, a rise of 24.6%. EPS 6.5p.
- Valuation 12-month rolling forward PE is 16.6X
- Conclusion The story around the new banking products is very strong but the ROE today is 8%. This could develop into a highly-rated stock but it isn't there yet, and there are more competitors eyeing up this lucrative FX space that the banks have left wide open. With 30% EPS growth forecast to December 2020 the shares will probably also appreciate 30%. But I do want to know who thought up such an odd name.
Charles Stanley – Trading Update
Share Price 276p
Market Cap £140 million
Conflict Disclosure: No holding
Charles Stanley (LSE:CAY) is a wealth manager.
- Update AUM increased 1.2% over the quarter to £24.1 billion which includes net outflows of £0.6 billion (2.4%). Discretionary AUM grew 3.1% while advisory and execution only fell. Revenue for the quarter was up 5.9% to £41.5m
- Estimates The looks modestly ahead of the anticipated 4.7% revenue increase for the year to March 2020, while the improving margin is expected to deliver 27% PBT growth to £12.7 million.
- Valuation PER 15.2X Yield 3.4%. Price/Book 1.32 and ROE of 8.8%
- Conclusion The company continues to make progress towards the 15% margin target. That would equate to £24 million PBT, close to double this year's forecast. That would be c 40p EPS, putting the company on 7X its target. This is cheap, but when it gets there (which isn't without difficulty) it then isn't a business with growth. There is some upside but also some risk.
|DPS||dividend per share|