The Financial Grimes: Is this a risk worth taking?
This top City analyst reviews the financial sector stocks making headlines today.
2nd August 2019 10:21
by Jeremy Grime from ii contributor
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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.
Equiniti – H1 Results
Share Price 210p
Mkt Cap £764 million
Conflict Disclosure: No Holding
Equiniti (LSE:EQN) is an outsourcing business focused on financial and administration services.
- Results.8.3% Revenue increase to £275 million. 3.9% EBITDA increase to £60.9m which is a 22% margin. Organic revenue growth is stated at 10.7% in EQ, 7.2% in Intelligent Solutions, 5% in Investment Solutions and an 8.6% decline in Pension Solutions. 90% of the $5 million synergies on the Wells Fargo acquisition have been secured. Outlook is confident in delivery of FY expectations and the focus is on prudent allocation of capital. Net debt is £370 million which is 2.8X underlying EBITDA. Capex was £25 million.
- Estimates Statement gives confidence in FY expectations which are £90 million PBT and EPS 19p with 5.8p DPS
- Valuation PE 11X, Yield 2.8%
- Conclusion This is a highly leveraged business which has made a large US acquisition which has taken longer than expected to complete and integrate. There is a lot of risk here and I would expect the rating to be lower for such high risk.
| 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.
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