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Daily Grime - CBG; CMC; CAY; MANO; KGH

ByJeremy Grime
Published 21/11/2019, 10:51
Updated 09/07/2023, 11:32

Close Brothers (LON:CBRO) – Trading Update

Share Price 1455p

Mkt Cap £2,198m

Conflict Disclosure: No Holding

  • Update Banking increased loan book 0.9% in Q1with a stable NIM and a modest increase in bad debts. Asset Management increased AUM 1.7% to £11.9bn and Winterfoods was subdued.

  • Estimates. 2% increase in PBT is expected for the year to July 2020. £270m.

  • Valuation ROE anticipated in 16% and the shares trade at 1.8X book value.

  • Conclusion. The company is so cautious it is barely growing. Which may be a time when the impatience of markets is tested and with a SOTP close to £20 it could attract predators interests. In the absence of a bid the 4.7% yield may be enough for the patient investor.

    • CMC Markets PLC (LON:CMCX) – H1 Results

    Share Price 126p

    Mkt cap £365m

    Conflict Disclosure: No Holding

  • Results Net Operating income is up 45% to £102m. PBT shows a strong recovery to £30.1m (£7.2m). EPS 9.5p and DPS 2.85p. Revenue increases were driven by a small drop in the number of active clients but a significant increase in revenue per active client. The ANZ white labelling agreement has started to produce revenue with Australian broking increasing by £9m to £14.5m. Regulatory uncertainty remains in Australia with the date for the reforms not yet clear. Outlook is positive and excited.

  • Estimates. FY estimates to March 2020 seem to anticipate £35m PBT which is way too low

  • Valuation The PER of 11.1m is based on forecasts that are way too low.
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  • Conclusion Earnings could double from the current forecasts over the next 1-2 years. I imagine the share price could do at least that too.

    • Charles Stanley (LON:CAY) – H1 Results

    Share Price 255p

    Mkt cap £130m

    Conflict Disclosure: No Holding

  • Results FUMA increased 2.1% over 6 months to £24.6bn while Discretionary AUM were up 6.1% to £13.9bn. Revenue margin was 70bps, up from 62.9bps benefitting from re pricing. Total revenue £85.4m. PBT increased 71.9% to £9.8m which is an operating margin of 11.2%. Outlook is confident of achieving a sustainable improvement in underlying profitability.

  • Estimates Estimates for the full year anticipate £11m PBT from Revenue of £158m, a margin of 7.5%. This has been blown away by the £9.8m PBT achieved in H1, driven by strong revenue and higher margin.

  • Valuation On existing forecasts the company trades on 14.2X and yields 3.5%. If we used a revenue number of £180m and imputed the target 15% margin we get £27m PBT. That is cheap for £130m mkt cap.

  • Conclusion After a few years of failing to deliver this now looks like they could get there.

    • Manolete (LON:MANO) – H1 Results

    Share Price 510p

    Mkt Cap £222m

    Conflict Disclosure: No Holding

  • Results The words “these are a strong set of results” always fills me with fear. As if we won’t be able to tell from the numbers. Net Asset Value is £30.9m while the company has an unutilized £20m facility from HSBC. This NAV produces revenue in H1 of £7.5m and PBT of £4.3m. EPS 7.9p. Strong investment in new cases. Of the £7.5m revenue £5.6m was derived from fair value movements.
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  • Estimates FY estimates anticipate £10.2m PBT for FY to March which looks reasonable in the light of £4.3m in H1.

  • Valuation The company achieves a c. 30% ROE so may be expected to trade at perhaps 3-4X book value which is around half the current share price.

  • Conclusion This is a fund which achieves a high ROE because of its specialist niche and capital light model. It is priced as a growth stock. The markets tendency to confuse funds with growth stocks is what attracted the shorters to Burford. This valuation is out of kilter with reality.

    • Knights Group (LON:KGHK) – Trading Update

    Share Price 331p

    Mkt Cap £244m

    Conflict Disclosure: No Holding

  • Update H1 trading is reported to be “strong” which is in line with expectations. 43 new fee earners recruited in H1. New larger Manchester offices too.

  • Estimates FY PBT is expected to be £40.6m, EPS 10.7p

  • Valuation PER 20X yield 1%

    • Conclusion Knights is a strong model but 20X is a full valuation for a people business.

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