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Daily Grime - ICP; EQLS; EQN

Published 19/11/2019, 10:19

Intermediate Capital Group PLC (LON:ICP) –H1 Results

Share Price 1494p

Mkt Cap £4,339m

Conflict Disclosure: No Holding

  • Results PBT up 24% to £153.4m. EPS up 16.5% to 50.8p. Interim DPS up 50% to 15p. Increases driven by AUM up 11% to EUR 41.1bn and fund management profits up 32% to £85m. Investment company profits were lower at £66m (2018 £115m). Weighted average fee rates are 0.86% and the positive outlook guides for a target margin of 50%, previously 43%.
  • Estimates The full year estimate for PBT is £251m which with £153m delivered in H1 shouldn’t trouble the scorers.
  • Valuation With c.55% of the profits delivered from the fund management division where the mandates are long term we could value this at perhaps 12-15X pre tax earnings which provides a valuation of £2-£2.5bn. Then we have an NAV of £1.4bn giving a valuation of £3.4bn- £3.9bn, between 12% and 23% below the current market cap. Yield is 3.3%
  • Conclusion. The shares may be up with events on today’s PBT but with a 24% growth rate despite reduced investment company profits it won’t be long before the company outgrows its valuation.
  • Equals Group (LON:EQLS) – Acquisition

    Share Price 85p

    Mkt cap £151m

    Conflict Disclosure: No Holding

  • Acquisition UK based payment services provider is acquired for £1.7m with a further £2m deferred. The company provides corporate FX and an infrastructure services international payments platform. The founders of Casco will retain a 48% economic interest in the business. The acquisition price represents 2.3X the economic revenues acquired or 25X the economic EBITDA acquired.
  • Estimates. On historic figures the acquisition would add c 1.5% to EPS but close to 10% to revenue.
  • Valuation PER is 14.6X
  • Conclusion This collection of FX/ payments businesses could well transition into a digital banking platform, but the businesses are early stage generally and there is acquisition risk. The shares could do well medium term, but it may take longer than Argentex and Alpha FX to get there.
  • Equiniti (LON:EQN) – Trading Update

    Share Price 227p

    Mkt cap £829m

    Conflict Disclosure: No Holding

  • Update The “reassuring” performance means FY results are expected to be at the upper end of expectations. The US business is now building momentum with cross selling new products becoming effective. Leverage is expected to be at the higher end of market expectations. Outlook is well positioned with organic growth expected in the UK and accelerated growth potential from the US while margin improvement is expected.
  • Estimates The 2019 top end of market expectations is £142m and leverage 2.5X. Next year’s consensus EBITDA of £150m looks very sedate given the strong outlook. Forecasts anticipate little margin growth.
  • Valuation The PER of 12.2X and yield of 2.5% is low. However with c £360m debt the EV/EBITDA is c8X
  • Conclusion Having had teething problems post the US acquisition of Well Fargo Shareowner Services accompanied by high leverage this is now looking like a strong recovery stock when the leverage turns from a risk to a driver. The shares could re rate as the cash generation increases.

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