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Great that Plus might attract a large new customer base from Robinhood and other platforms/brokers. As we saw in Q2 20 with VIX trading above 25 and active users doubling Q on Q Plus500 did brilliantly.
However, as discussed time and time again on this board, Plus500 don't hedge (expensive and unwarranted in normalised markets) so they are exposed to surging prices if the Reddit effect were to hit. Bitcoin and Silver are obvious markets where Plus500 may take book losses.
However, I am buying more Plus500 on the basis that they are clever people with highly sophisticated proprietary technology and risk management systems. They have seen what has happened in the US and should have taken all necessary precautions to protect themselves in key markets.
If this was on 20x and the end market was shrinking I might worry. But, its on 5x and the end market is expanded rapidly (as shown in the US). If they can avoid surge markets and heavy book losses this is one of the cheapest shares I have seen in a long time.
ps. I revisited the last earnings call with the CEO and FD in the summer. The thing that surprised me was that after a period of exceptional /all-time record growth there were only two questions after the call and from what I gather a very small audience on the call. ps. both questions were from brokers/research providers and were pretty fluffy.
Bottom line - no one follows this company at the moment .
The IR guy seems decent and has a good CV but for one reason or another its off the radar.
Markets are frothy, valuations are high and investors are desperately looking for good value growth names to buy into.
Plus500 is on a dirt cheap valuation (relative and in isolation), growing fast, loads of cash , paying a dividend, buying-back shares, in line for further VAT rebates in Israel, and also a brilliant hedge for when the wider economic reality bites, Governments turn off the stimulus tap and markets suddenly look over priced.
This is a very easy buy, if you can stomach what could happen in the short term with the social media names.
I have an account with Plus and while I may be looking in the wrong places I can't seem to find any of the niche small caps, US or UK. I wanted to buy shares in ITM Power, AFC Energy and Plus itself, in my Plus account, but sadly no market. On the positive side, we should have avoided all the Wall St madness of recent days.
Although, I think Amigo Holdings might look like a short squeeze candidate. and there may be a bit of contagion in certain UK names.
I didn't need any other reason to keep buying Plus. As Beauchamp says, on fundamentals this is insanely cheap and I think we are all optimistic that Liberum (etc) will have to upgrade forecasts for this year, possibly by 25%+. Not only that but we may even get a positive surprise with a nice special-dividend (possibly?).
But - a friend of mine just pointed out that the VIX is +55% at over 35. He tells me that anything above 25 should be considered super normal and usually means big profits for Plus, IG and the rest.
Sadly, some of the big retail trades (ignoring Reddit stuff) like Tesla and Bitcoin are also under pressure. Which again means profits for Plus, IG etc..etc...
I am getting quite excited about current outlook in Feb's FY update. I wouldn't be surprised if January turns into the best month in Plus's history.
And on 2x cash?
This is crazy cheap!
Cost of hedging interesting as well...Thank you for making that point.
Interesting topic. Would suggest the relative discount is less about hedging strategy and more about management style/legacy issues.
I suppose we hope that the new CEO and the BOD can work together to improve transparency and governance and to attract a more institutional shareholder register.
Interesting that only Blackrock and Odey seem interested (unless I am missing any Funds off the register).
I believe it is James Hanbury at Odey, not Crispin Odey. Hanbury supposed to be a very clever investor.
Lets hope more follow him in!
Agree completely, its a very interesting topic.
It's not like the customers care whether their bests are hedged or not? ie. Plus won't lose business as a result.
Perhaps in a normal operating environment it is less of an issue, put in post-covid volatility it may have been sensible for Plus to have take a more pragmatic approach to risk.
Thanks GG,
I admit to not doing the most thorough fact-check, so appreciate the correction.
But, even just focusing on active users it is clear that CMC and Plus are moving at different trajectories. I believe average deposits per-customer are about the same as well.
I would love the market to take Plus a bit more seriously. One day!
"Not only that, looking forward it is interesting that CMC are projecting continued growth into 2020,"
meant 2021
Really interesting looking at CMC results. Slight issue comparing apples and pears because CMC are a June y/e but I think a very simple comparison re-iterates why we all feel Plus is so undervalued. (not sure H2 was that good for Plus either so a fair comparison in many ways)..
As an example -
Active users - Plus c200,000 v CMC c50,000 .
FY 20 sales - Plus £636m (est) v CMC £252m
FY 20 PBT - Plus £400m (est) v CMC £99m
Not only that, looking forward it is interesting that CMC are projecting continued growth into 2020, whereas Liberum are forecasting a 50% decline is Plus revenue, as well as a 50% decline in EBITDA.
The fact that both businesses are roughly the same size (£1.2/1.3b) just seems crazy to me.
But, time will tell and Peter Cruddas is a good operator and well known/well liked among UK institutional investors.
But - a quick back of the fag packet would suggest Plus shares could be/should be trading considerably higher.
Very true...I have glossed over quite a bit of historic turbulence, particularly 2018 with the crypto boom (could they have learnt from it?)
I suppose my overriding defence is that it is priced to disappoint. If the shares were on a 20x PE I would worry, but on 10x it almost feels like any bad news is already factored in.
But - agree with the sentiment and its not a share that performs in line with normal valuation parameters sadly.
Hold on tight
I was frustrated with the company and its brokers in the summer. I wanted massive upgrades, I wanted undiluted positivity, I wanted everyone in the world to know how great this company is and how much money we were all going to make.
Credit to the management and credit to the brokers. They took a conservative approach to 2020. The called it a "one-off" and rightly so! We can't value a one-off and it would have been irresponsible for the company to suggest that 2020 was anything other than a freak isolated occurrence.
However, it has gone to far the other way......I paid 1500p for PLUS shares in Jan 2019........Since which point Revenue is +100%, EBITDA +100%, PBT +100%, Cash in bank +100%. / Share price today 1357p....???
On top of this progress, and based on Liberum estimates for 2021 (new normal), Plus is trading on a PE of 10x, EV/EBITDA of 5.7x and a forecast Div Yield of 5.7%...and by the way.....This is premised on Revenue falling by more than 50% in 2021 v 2020, even though they will have added c100,000 new customers....
Plus will SMASH Liberum numbers this year and particularly if markets have a rough/flat year (inc crpyto). This should be on a PE of at least 15x which would suggest a PPS of 2205p (147p 2021 EPS..Liberum)...
so....60% upside + 5.7% div (minimum).
This is so cheap! Time to start telling people perhaps?
I haven't read any of the comments this morning but have just read the RNS.
If you are announcing a £10m fundraise why not take the time to run the Press Release through some spell checker or grammar software.
All very amateurish.
I'm quite optimistic actually. Plus has been faced with the double whammy of (1) rising markets (particularly retail favourites like Tesla and Crypto) and (2) a "connected" shareholder liquidating his holding.
The disadvantage of (1) is that Plus will have lost money in the first week in Jan, the advantage being that they will have registered new customers and will have seen their clients average deposit increase. When the music stops at some point in H1 Plus will be sat there ready for the tills to start ringing. Assuming reality bites and the market corrects, and assuming book loses revert to somewhere approaching normal Plus are going to make a LOT of cash. I continue to see my holding as a low risk hedge in the event the wheels come off elsewhere.
With regards (2). Its entirely natural that Gal will sell his holding and we should see it as a positive. From what I gather, the new CEO is intent on trying to refresh the optics and reduce the discount to IGG and CMC. In order to do this effectively I assume he will be clearing house, distancing himself from the founders and generally trying to establish a better foundation for governance . Gal selling is hugely positive as it cuts ties with the old guard and allows the new management team to concentrate on building a more transparent company.
On fundamentals this company is ridiculously cheap. 3x cash, 3x EBOTDA, ,5x PE etc....etc....
They will have felt some pain in the wild rallies into New Year and early Jan but all this really achieves is to suck more mug punters onto the platform, and when the music stops Plus will rip their eyes out like they always do.
This could be ugly to watch and people are going to lose a lot of money! I'd rather be a Plus shareholder than a Plus customer that's for sure!
Interesting comments from all this morning, thank you. Plus basically re-affirming why they trade at a discount to IG and CMC. The lack of clarity is always disappointing and we are left to wonder whether we were caught the wrong side of any one of the vaccine, crypto or oil. But, I love Plus as a hedge. 300k+ new customers this year, 90% long and all ready to have their eyes ripped out (I have been there), it will be like lambs to the slaughter. On 3x EBITDA, yielding nearly 10% and set to benefit from volatile (aka weak) markets - we are likely to see a very strong H1. I am more than happy to ignore the way management operate and stick these in the bottom draw for 2021. If it dips below 1400p I would happily buy more. Also - old guard leaving is good news, new blood and more transparent style will be appreciated by institutional investors.
Thanks OOS. I was too cautious to say it, but its effectively an Israeli discount which is a shame. I agree with all your points and while frustrating there is often no smoke without fire with companies like Plus. But, from the points you raise the only one that worries me from a genuinely objective view is the fact they don't hedge. I think it will work in Plus's favour as the Mkt retraces in H1 2021 but in a world of stimulus frothy markets could eat into out profits here.
re: Special Dividend. We have to get one surely? Plus would need to have an absolute shocker in Q4 to get to a point where they won't have surplus retained earnings (after normal div and buy-back). If Plus standstill in Q4 they still have $800m+ in cash and will have to distribute something above the currently stated buy-back. Lets hope they do as the price will rip.
Thank you for this Barry@. While a relatively large shareholder in Plus I am not a customer (have always used IG) and wasn't aware that Plus do not offer a spread-betting service. I am typically a cautious investor and saw Plus as a hedge in volatile markets, which has worked out well having invested at c800p. However, I just don't understand the disconnect in valuation between Plus and the wider peer group. Assuming a 60% pay-out (of retained earnings), netting off buy-backs, we could be looking at a 10%+ Special Div, a +10% FY divi, a PE of <10x, and an EV/EBITDA ratio of <2x....This has to be one of the cheapest shares in London? The only concerns are being unhedged and the market pops 5% and some regulatory/tax crackdown that no one predicted. Why are CMC and IG on such a large premium? If anyone knows I would be very grateful. Thnx again for all the input.
Very helpful, thank you ..and particularly as I assumed CFDs were CGT exempt. Good to know. Agree with everyone you have said and appreciate the response! GLA
Apologies if this has already been discussed at length. But, I believe we are all assuming the Chancellor will amend CGT in the new tax year, in line with a taxpayers income tax rate. Is this not great news for PLUS and the other spread betting companies.? On a similar theme , have we been updated on PLUS's intention to setup/acquire a traditional stockbroking business (mentioned earlier in 2020 in an RNS if I remember correctly). Surely a tax efficient saving product (using CFDs/Spreadbets) in a traditional wealth management wrapper would be a winner? Or are the CFD companies running scared of HMRC themselves?
Thank you, very helpful.
Hi. I am an Amigo shareholder and hugely supportive of the new management team and optimistic about future prospects. I have followed the board for a while although never posted. But, I have a genuine question and would love an answer.
Question - Is the "Provision for Complaints" included in Unrestricted Cash, or is it separately covered out of other funds /debt ?
I assume any fines would need to be covered from "Unrestricted Cash" but wanted to be 100%.
Either way. It feels like things are beginning to move in the right direction and the new hires are encouraging for a number of reasons.
Thanks in advance.