Stockopedia comments Graham Neary - CMCX25 Jul 2024 14:04
Graham’s view
Based on the numbers above, there remains a very wide range of possible outcomes for FY March 2025.
At the low end, perhaps we should see an operating profit this year (excluding non-recurring charges) of at least £75m. At the high end, it could be £115m+.
After taxes, the consensus figure on Stockopedia suggests that net income could be £49.3m. Clearly there should be scope to beat that if net operating income is at the higher end, but it’s too soon to tell.
It’s worth noting that interest rates are a factor as CMC earns income on client deposits and on its own cash (£35m earned in FY March 2024). That might not be a big factor in terms of FY March 2025 but for future years, the path of interest rates certainly needs to be taken into account.
Finally the tie-up with Revolut, announced in June, strikes me as something with the potential to be huge for CMC. The initial product set includes FX, Index, Commodities, Treasuries and Equity CFDs.
I am a heavy user of Revolut, although I’ve commented publicly before that I do have some risk-related concerns that, until they are resolved, would prevent me from trusting it with larger deposits. But those concerns are probably irrelevant when it comes to the partnership with CMC - from the point of view of CMC, I would say this is a very exciting opportunity to expand the usage of CMC’s trading infrastructure. Hopefully we can learn more about this partnership very soon.
On balance, I’m happy to maintain my positive stance here.
It’s true that the PER is now arguably demanding:
However, the company reported net assets of over £400m as of March 2024, mostly tangible. Within this figure “own funds” were £325m and straight cash was £160m. So I think there are plenty of liquid assets to help support CMC’s valuation, even over £800m.
Even the algorithms don’t think that the value on offer here is all that bad. And they give a nearly perfect Quality score!
https://app.stockopedia.com/content/small-cap-value-report-thu-25-july-2024-placeholder-1003366?order=createdAt&sort=desc&mode=threaded
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