Positive write-up on STM13 Jan 2017 07:15
OT : Beamer21, that wasn't my sale - I intend to keep my holding long-term as I expect STM to be at 65p-70p reasonably quickly, and hopefully a lot more than that over time with acquisitions etc.
Graham Neary, Paul Scott's small cap write-up partner, likes STM:
http://www.stockopedia.com/content/small-cap-value-report-12-jan-2017-part-2-sdm-stm-gym-pmo-sgp-166428/
"STM (LON:STM)
No. shares: 59.4m
Market cap: £26m
Trading Update
Another "in-line" trading update (generally, I will cover trading updates more briefly than results statements, especially when they are in-line).
The Board is pleased to announce that the Group has traded in line with market expectations of profit before tax of £2.7 million for 2016 (2015 actual: £2.7 million).
Kudos to the company for quantifying market expectations in this announcement, rather than inviting readers to look it up somewhere else.
Some positive sounds that growth might ramp up in future years, after the flat result in 2017:
As was anticipated, the pricing initiative taken by the Board in the earlier part of the year has significantly increased the take-on of new business for its QROPS international pensions product with new policies for the second half of the year up by circa 50 per cent on the first half of the year and 27 per cent on the second half of 2015. As previously indicated, whilst this strategy resulted in a reduction in first year profitability, it does result in an increased level of recurring revenue for future years. This leaves STM well placed to deliver significant growth in revenue and profit in 2017.
QROPS is a type of overseas pension scheme, which is a bread-and-butter product for STM (a cross-border financial services provider, catering to high-net-worths and corporates).
Checking the STM website, I see they are offering a "zero establishment fee" on QROPS until March 2017 (and presumably until after then, if it is working?)
Tolerance of short-term losses on customer acquisition and customer set-up is a key part of the competitive dynamic in some industries. It looks as if STM have realised that their business model still works with higher losses per customer on set-up.
I have seen first-hand how some businesses will accept customers which won't become profitable unless they stick around for 5-6 years. That works sometimes with long-term products, e.g. with pensions and other financial policies which could be in force for several decades.
STM shares look good value to me against profitability, and the business looks to be in pretty good shape. So I'm not sure what the "catch" is yet. There is usually a catch!"
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