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Daily Grime - ARW

ByJeremy Grime
Published 13/11/2019, 08:05
Updated 09/07/2023, 11:32

News

  • One Savings Bank delivers an upbeat Q3 update after completing its combination with Charter Court on 4 October, which is in line. Loan book growth high teens at OSB and high 20’s at Charter Court.

  • J D Wetherspoon's (LON:JDW) results make good reading today. Tim Martin swivels his guns to target corporate governance and its “Noddy in Toyland aspect of the current farce”. Columbia Threadneedle and Blackrock (NYSE:BLK) get special mentions.

  • In a sign of things to come British Land (LON:BLND) has abandoned physical analyst meetings for the first time. Just a conference call.

  • Crypto Peer to peer lender JustUs has launched a cryto lending platform where investors can top up their account with any currency including cryto and lend it over the platform against property or loans. The crypto currencies are thereby becoming integrated alongside other currencies. The company is FCA authorised.

    • Arrow Global (LON:ARWA) – Fund Management strategy

    Share Price 210p

    Mkt cap £373m

    Conflict Disclosure: No Holding

  • Results Everything appeared to be in line with expectations yesterday while the shares were off 8%. Perhaps because the accounting is akin to asking the directors their estimate of profit for the year it has always been of great interest to the shorters, in the hope that one day the directors estimates will turn out to be biased. Which is why operating the business as a fund management company earning management fees makes sense.

  • Estimates The company aims to derive a 25% ROE and in the current year is running at an underlying rate of 29.5% with leverage higher than target at 3.7X (target 3X-3.5X). Fund Management has the ability to drive a higher ROE higher.

  • Valuation PER 6.2X and yield 6.2%. The shares trade at 1.8X book value though book value is based on discounted estimates. However, when the weighted average cost of debt is 3.7% and the cost of equity appears to be in the region of 16% there appears to be plenty of room to make money in between the lenders assessment of risk and the equity markets assessment of risk.

    • Conclusion Intermediate Capital had a similar problem with its profits being unpredictable and frequently based on estimates. In 2014 20% of their £175m PBT came from fund management, while in 2019 52% of the £278m PBT came from fund management. The shares are up 190% over the 5 year period. Sometimes markets don’t anticipate returns until they appear on the screen. Arrow could have a strong 5 years ahead.

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