The Financial Grimes: A useful dividend compounder

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

• Urban Exposure (LSE:UEX)launches a 7-year retail bond at 6.5% which, by way of comparison, is towards the top end of the projected returns from lending through funding circle where 5-7% is projected. Urban Exposure doesn't do impairments.

• Frenkel Topping (LSE:FEN) – Yesterday, the Ogden discount rate used to calculate claims for motor accidents was set at -0.25% which is lower than expectations of 0-1%. Direct Line Insurance (LSE:DLG) and Admiral (LSE:ADM) came off a little among suggestions that premiums may rise, while Frenkel held back expectations of higher AUM growth, suggesting it would make little change. Hastings (LSE:HSTG) this morning says they expect it to result in a one off £8.4 million charge. There is a sneaky feeling Frenkel Topping are being conservative.

Gateley – Full-Year Results

Share Price 164p

Mkt Cap £181 million

Conflict Disclosure: I Hold

Gateley (LSE:GTLY) is a commercial law firm.

• Results Revenue up 20.2% to £103.5 million, adjusted EBITDA up 15.7% to £19.1 million and PBT up 8.9% to £15.9 million. EPS up 17.8% to 13.15p and DPS for year up 14.3% to 8p. Operating margin fell from 17.22% to 15.34% as staff costs rose to 61.3% of revenue. Debtor days were 166 vs 175 last year. Net debt £3.2 million. Outlook says new year has started well.
• Estimates.  These results look to be politely ahead of consensus. Going forward 9.5% PBT growth is forecast.

• Valuation  PER 12X, Yield 5.3%. DWF trades on 12X and yields 5.9%.

• Conclusion The share price has barely moved over the last 12 months as more lawyers have come to market. The company is now looking like it may have outgrown its valuation on 12X. Good value.

City of London Investment Group – Pre-Close Update

Share price 430p

Mkt Cap £114 million 

Conflict Disclosure: No Holding

City of London Investment Group (LSE:CLIG) is an emerging markets equity manager.

• Statement AUM is up 5.5% over 12 months, which is up 1.5% over the final three months of the year to $5.389 million. PBT expected to be £11.4 million (20187 £12.8 million) PAT expected to be £9 million (2018 £10.1 million) EPS expected to be 34.1p (2018 39.3p). Detailed assumptions for analysts models are set out in a table that usually takes 45 minutes of an analyst meeting to convey.

• Estimates The £11.4 million PBT is ahead of the consensus expectation of £10.9 million. EPS is also ahead of the 33.5p expectation. Forecasts are for 6% PBT growth which looks in line with the guidance of 4.6% AUM growth and no increase in overheads.

• Valuation PER 12X Yield 6.3% EV/AUM 2.3%

• Conclusion With the founder retiring, there is a chance this company could be acquired which should underpin the valuation. The shares are up 9% over the last 12 months and look set to continue as a useful dividend compounder.

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.