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Finally an analyst has come up with a reasonably serious, still probably way too low, estimate for this year of around 200p per share. Good heavens this has taken so long. It is having quite an effect on the price. Can fund managers not see through broker estimates and take their own view on outcomes?!
Jefferies upgrade. Now at 280c this year and 203c in 2022. PT raised from 1760 to 1850p.
Says that his work on lifetime value of cohorts implies revenue potential this year of over $700m if CTP broadly neutral this year and no worse than expect impact from revenue restrictions in Australia.
"Our assessment of the historical average lifetime revenue contribution per client applied to current and prior year cohorts continues to imply material upside to our base case and consensus"
IGG client income in fY20 = £959m
Net trading revenue in FY20 = £649m
The difference between these two numbers is the cost of hedging, i.e. £310m a 32% of their client income. prior year this was 26% of their client income.
PLUS does not have this cost, it has volatility in terms of Customer trading performance that overtime is expected to be neutral.
PLUS Customer income over 2019 & 2020 was $1.326bn
The Customer trading performance over that same time was a loss of $0.100bn. This is 8% of customer income, which can be compared with IGGs cost of hedging... and still while this is an 8% loss, over a long period this is expected to be 0.
"I think being significantly reliant on your clients losing money for you to make some is a fatally flawed business model."
This statement shows you don't understand it.
Kindly crack on ramping up IGG on the IGG board.
Or at least do a little research on the company first (
We are not reliant on that at all.
Trading performance fluctuates up and down and is immaterial over time. Plus make their money from spreads and overnight charges just like CMC and IGG.
Trading performance fluctuates up and down distorting the figures which is why it is *harder to understand*, and this is also why management use customer income rather than the reported revenue, as their main KPI.
Apologies but you didn’t seem to grasp this in either your first, or your latest message. You just seem to want to express your confirmation bias about your feelings towards IG.
Nope, I understand it fine thanks. I think being significantly reliant on your clients losing money for you to make some is a fatally flawed business model. I don't think IGG is fully hedged mind you - I believe they allow this exposure to fluctuate within certain ranges. However, the main reliance being on spreads, share trading, and income on short positions is a far better model and should attract a far higher rating (as can be seen). That said, I also think that IGG customer base is much higher quality, and will trade more often and for longer. In addition, the huge free cash flow allows for bolt on acquisitions like Tasty Trade, which the market is now recognising as a shrewd move for the long term.
The difference is PLUS don't hedge, IGG and CMC do.
PLUS is more more volatile, if you don't understand it then you are definitely better sticking to IGG and CMC which is simpler to understand.
PLUS are now looking at hedging, because of pressure from investors who don't like the swings. Personally- id rather they didn't, hedging is a not cheap. it makes up a large chunk of the cost of sales for IGG and CMC
Well gg, that all seems a bit convoluted to me. I still believe that the revenue performance and the ARPU at CMC and IG
has done far better over the past 12 months and is significantly more stable than Plus - likely to be a result of more exposure to 'professional' investors versus Plus. That being said, Plus's rating looks cheaper, so perhaps this is all reflected in prices already.
The numbers are a ratio. I.e. Customer Income of Plus* divided by the net operating income of CMC**
My objective was to investigate whether i agreed with your statement: "I'm not convinced that these are good figures at all when looking at equivalent quarter last year".
CMCs net operating income estimate was published on the 25th of march, so they are estimating only 1 week of a quarter, so it is sufficient to draw conclusions from.
*Plus’s Revenue consists of Customer Income & Customer Trading performance.
Customer trading performance comes from gains and losses on customers positions (should be zero over time, but can be volatile month on month.)
Customer Income is from spreads and overnight charges. Q1 2021 = $221.5m, Q1 2020 = $233.5m. This is the core of the business, it does not expect to win or lose on Customer trading performance.
** yes I meant net operating income here rather than revenue.
Well you're going to have clear a few things up for up for me then. Firstly, I don't actually know what those numbers are - Difference? ratio? One is income, one is revenue? Please explain. Secondly, your figures imply you know what CMC's revenue was in the 3 months to 31 March 2021, but these haven't been released to my knowledge - the pre-release from from them towards end March only covered net operating income, not revenues.
CMC and PLUS share the same quarters so analysis is easier. Here are the no. of times larger Plus's CUSTOMER INCOME is over CMC's revenue by quarter (i am comparing like for like CALENDAR year quarters)
(apologies for the CAPS - bold or italics would be prettier we don't have that option here)
2019 Q2 1.8
2019 Q3 2.1
2019 Q4 1.1
2020 Q1 2.2
2020 Q2 3.1
2020 Q3 1.9
2020 Q4 2.5
2021 Q1 2.6
PLUS have done better than CMC when comparing customer income across Q1 2021 to Q1 2020.
PLUS were on the winning side of customer trading performance in Q1 2020 to the tune of 82m which should be neutral over time, this was not repeated in Q1 2020
Not fully comparable I agree, but the size of the difference is extreme in my view even taking that into account.. I also looked at IG's revenues for the following quarter in 2020 which does include March and it's only about £30mn above what IG managed in the quarter to end Feb just gone. On that basis, I think it's entirely possible that IG will match last years Q4 revenue (which includes March 2020). I believe this is a substantially better result than Plus, though I acknowledge it is also on a lower rating than IGG.
@MattTheBrave - A quarter ending February 2020 a quarter ending March 2020 are not comparable at all. life was normal in Feb 2020,markets got a little volitile from the 24th of feb, life changed in march and marketst got very volatile.
Sum up the VIX for a quarter ending Feb 2020 = 955
Sum up the VIX for a quarter ending Mar 2020 = 1880
Revenues from spreads are actually quite similar q1 2020 and q1 2021 and q4 2020. The big swing factor is on the book where it goes from a huge profit for plus in q1 2020 to a small 2021. Worth analysing. Plus is so much lower rated than ig it looks crazily low.
I'm not convinced that these are good figures at all when looking at equivalent quarter last year - Revs down 36%, ebitda down 47%, ARPU down 54%. IG Group over similar period (3 months to end Feb) showed revenues up 65% with ARPU flat, and CMC trading is even stronger. It looks to me like Plus500 has managed to attract some interest from short term investors with nothing else to do under lockdown who are not following through now that volatility has eased. IG client base looks much higher quality to me.
Annualised eps of around 4 dollars on first quarter, not necessarily an exceptional quarter. That is about 3 pounds per share for the full year. So on first quarter annualised earnings a pe of 5 and that does not take account of the effect of valuing the cash mountain separately. If you value the cash at par and the operating earnings separately the pe using first quarter eps annualised drops to around 4. Does anyone know a cheaper share?!
Very positive & should extinguish the uncertainty created following a week Q4 20
Good results and year end forecast of 'moderately ahead of analysts' suggests a sp rise. Most significant for me is that statement about work to transition to a finntech and we know what that could do to the ratings in due course.
Tomorrow. GLA