The Financial Grimes: A good trade from this level

by Jeremy Grime, an ii contributor |

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.

Plus500 – H1 Results  

Share Price 571p

Mkt Cap £647 million

Conflict Disclosure: No Holding

Plus500 (LSE:PLUS) is an online trading platform.

  • Results Revenues down 42% to $148 million. EBITDA down 58% to $65.6 million. EPS down 56% to $0.45. Cash up 4% to $327.3 million. ARPU down 42% to $1,044 and customer acquisition cost also down 30% to $1,079. Dividend also down 56% to $0.2734/share.  Importantly, Q2 is 23% up on Q1 in terms of new customers and 11% up in terms of active customers, while non EEA countries is now 48% of revenue. While trading is reported to be in line with expectation, the outlook is optimistic and the company announces a $50 million share buyback.
  • Estimates No change, given trading is reported to be in line. $180 million pre tax profit anticipated for 2019 which is cents 123 EPS. New 60% payout policy may bring dividend expectation down from 80c to 74c.
  • Valuation PER 5.6. Yield 11%
  • Conclusion The shares are likely to move better as the dust settles post the regulatory changes. H1 has also been a time of low liquidity in markets generally so we can anticipate some more upbeat news over the next six months.  Probably a good trade from this level.

 

H&T Group Plc – H1 Results  

Share Price 341p

Mkt Cap £135 million

Conflict Disclosure: No Holding

H&T Group (LSE:HAT) is a pawnbroker.

  • Results PBT up 8% to £6.8 million but operating profit pre non-recurring costs up 16% to £8.7 million. EPS 15p. Net debt £11.6 million. DPS up 7% to 4.7p. The 65 Moneyshop stores have all been integrated. Pledge book was up 12.4% while the net revenue yield was up 3.8%. Scrap sales were down due to the delay in some diamond sales. Retail was up 12% while personal loan book was down 5.3%.  Average gold price was 5% higher over the period. Outlook is "excited" and trading is reported to be in line
  • Estimates 9% Revenue growth expected for the full year and 18% PBT growth to £15.9 million which is 33.5p EPS.
  • Valuation PER 10.2X yield 3.2%  ROE improving to 11.8% while the price/Book is 1.3X
  • Conclusion For the first time for many years the story is all there for this one.  The stores have expanded, introducing a little more gearing while the gold price is looking promising as it reaches new highs. It is up 26% since April. The only disappointment is the personal lending isn't growing.  I keep getting excited but these numbers read underwhelmingly.  I think it could just be the next six months that get exciting.  But I have said that before. It does keep moving to the right.
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
ARPU average revenue per user
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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