Secure Trust Bank’s (STB) pre-close update confirms the upbeat trends evident in its Q3 update in November. The strong lending rebound continued into Q4, loan repayment holidays are at low levels, and the balance sheet has remained robust and liquid. STB reiterated that its FY20 PBT would be well ahead of £9.7m (we forecast £13.0m). However, the new COVID-19 restrictions introduced in December 2020 have affected consumer loan demand into 2021, as well as the Motor Finance business. Management expects to be better placed to disclose its outlook for FY21 when STB’s FY20 results are released on 25 March. Our forecasts (FY21 PBT £31.6m, ROE 9.1%) and fair value (1,756p per share) remain unchanged.
Companies: Secure Trust Bank Plc
Paul Lynam, Secure Trust Bank’s (STB’s) CEO, is stepping down to become Equiniti Group’s CEO. David McCreadie, who joined STB as a non-exec board member a year ago, will replace him. McCreadie is a banker with 30 years of experience at RBS, Kroger Personal Finance and Tesco Bank. The transition should be seamless, with the growth strategy (organic expansion and M&A opportunities) expected to remain the same. Lynam leaves the bank with a well-capitalised balance sheet (we forecast 13.9% CET1 for FY20), resilient business, a good franchise and well positioned to react when the economy improves. STB will make its pre-close trading update on 21 January, but has reiterated its October 2020 statement that it is trading ahead of consensus FY20 PBT of £7.3m.
Secure Trust Bank’s (STB) Q3 trading update disclosed that Q3 was stronger than expected and FY20 earnings are likely to be well ahead of consensus forecasts. Loan repayment holidays in its Motor Finance and Retail Finance divisions were down remarkably and credit quality is not deteriorating. Loan demand is strengthening after the lockdown. Capital and liquidity remain good. The bank remains cautious due to continued COVID-19 and Brexit uncertainty and is still not providing formal guidance. We are upping our earnings forecasts and fair value from 1,704p to 1,756p. In our view, the valuation remains depressed compared to fundamentals with banking stocks still out of favour. STB trades on an FY20 P/BV of 0.53x, yet it has a strong track record of value creating returns (ROE above COE), a good capital base and liquidity. The Q3 good news reinforces our view that we are unlikely to see book value deterioration during this downturn to justify any NAV discount.
Secure Trust Bank (STB) reported H120 PBT of £5.1m (vs £18.1m a year ago) and a 3.0% ROE. Income grew 4% y-o-y, but impairments almost doubled, and payment holiday charges also hurt. STB notes that since the lockdown ended, business has been rebounding. Its robust capital (CET 13.5%), business model and proven agility allow it to react to the changing lending environment. STB currently trades on a P/BV of 0.49x, reflecting sentiment more than fundamentals given its profitability track record and successful model. Our fair value estimate is 1,704p per share, down from 2,428p..
Secure Trust Bank’s (STB) FY19 figures were good, as already flagged in its trading update. Underlying ROE was 14.0% (FY18: 12.8%), EPS was up 10% y o y and capital remained comfortable (CET1 12.7%). However, the COVID-19 pandemic has led to a significant drop in business activity and impairments are expected to increase. STB has suspended forward guidance since March due to uncertainty relating to the pandemic and subsequent economic recovery. Its relatively short duration loan book, already cautious lending stance and good capital position should help. Financial markets turmoil has the bank trading on a 2019 P/BV of 0.65x despite a track record of delivering value creating ROE above its COE.
Secure Trust Bank (STB) is delaying the release of its FY19 results, due on 26 March, as requested by the FCA on account of COVID-19. It was aiming for double-digit earnings growth in 2020 and stated that its first two months of trading was strong and ahead of management expectations. COVID-19 uncertainty has nevertheless prompted STB to cancel its forward guidance and final 2019 dividend payment. We are maintaining our FY19 forecasts as the pre-close statement indicated that results would be in line with expectations. However, we are suspending our 2020â21 forecasts until there is more clarity on the impact of COVID-19. Our DDM fair value of 2,428p per share is equivalent to a P/NAV of 1.8x in 2019. This valuation reflected assumptions that STB would deliver returns considerably above its 10% cost of equity (COE) in the medium and long term.
Secure Trust Bank’s (STB) pre-close trading update indicates that FY19 results should be in line with expectations, despite the economic slowdown dampening loan demand in the second half of 2019. STB highlighted its strong control over risk while interest margins have been stable. The bank is cautiously optimistic about 2020 and is well positioned, with healthy capital, good liquidity and new business pipelines. STB does not envisage material changes to 2020 guidance, and we are maintaining our estimates and 2,428p per share valuation.
Secure Trust Bank’s (STB’s) trading update for Q319 had a reassuring tone. The business trends and ‘overall results are in line with management expectations’. Management noted that demand slowed in September, but this is not a surprise given Brexit deadline concerns. STB has been in de-risking mode for several quarters and has been repositioning its loan book in anticipation of economic and political uncertainties. At the same time, the short duration of its loan book allows it to respond quickly as the lending environment changes. We are not making changes to forecasts or our fair value of 2,428p per share.
Secure Trust Bank (STB) reported H119 adjusted pre-tax earnings up 14% y o y driven by volume growth and lower impairment rates. With a diversified lending model it has shown the ability to shift asset allocation significantly, de-risking and avoiding price pressures prevailing in some lending asset classes. By putting the brakes on early, STB is now reaping the rewards, with good profitability and the flexibility to adjust to macro and political changes.
Secure Trust Bank’s (STB) trading update seems to vindicate its decision to step away from mortgages for now and focus on segments where the risk-reward pricing is more attractive. The retail and motor finance segments (both with net revenue margins above 10%) have been doing well and earnings are slightly ahead of management expectations in the first four months of this year. We are not changing our forecasts, but may revise them if interims in July confirm the good news.
The FY18 results provide evidence that Secure Trust Bank’s (STB’s) strategy of combining de-risking and selective growth is working. Adjusted EPS rose 39% y-o-y while loan growth was a robust 27%; ROE increased from 8.9% to 13.1%. STB targets further strong growth in 2019 and is investing in areas such as a new motor finance platform, treasury and risk management to underpin this. STB has entered 2019 with good momentum, healthy capital and proven flexibility to adapt to opportunities and challenges that may occur in the macro and political environment.
Network International Holdings—Pleading enabler of digital commerce across the Middle East and Africa region, operating across over 50 highly underpenetrated payment markets that contain a total population of 1.5 bn. 2018 rev $298m, underlying EBITDA $152m. Due April. No new funds to be raised. Secondary sell down. Targeting 25% of at least 25%. Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m.
Companies: STB ADB TGP 7DIG GDR MERC MTW IGAS
Secure Trust Bank’s (STB’s) pre-close trading update was encouraging, indicating it expects to deliver results in line with management’s and the market’s expectations. The bank has proposed a stop on new mortgage origination, unhappy with current price pressure and loan to value metrics, but does not expect this to have a material impact on 2018 and 2019 numbers. The bank sees itself entering 2019 with positive business momentum and robust capital and is well placed to continue its selected growth strategy despite the current political uncertainty.
STB’s Q318 trading update was upbeat. There are signs that the repositioning strategy is working, trading conditions are robust and it is on track to deliver guided earnings. The Tier 2 capital issue during the period added 268bp to capital, further positioning STB for future growth. Our estimates are unchanged (EPS growth 32% FY18). The shares now trade at PNAV of 1.2x, which compares favourably with our forecast ROTE.
H118 results show Secure Trust Bank (STB) is making good progress in shifting its loan mix into lower risk segments and where pricing is more attractive. Despite being in a transition phase, STB delivered strong momentum in loans (22% YoY) and PBT (+38%). Concerns regarding these asset mix changes and the transition drag on earnings have probably contributed to recent share price weakness and the current valuation suggests there is room for rerating as STB continues to deliver successfully on its strategy.
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Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
Companies: AVO ARBB ARIX BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
What’s new: Ahead of the publication of the Group’s interims results for the six months to 31 December 2020, CLIG has released a detailed trading update which reveals: Group consolidated FuM of US$11.0 billion (£8.0 billion), which is twice the FuM of US$5.5 billion (£4.4 billion) at the Group’s year end on 30 June 2020; The merger with Karpus Management Inc ("KMI") added c US$3.6 billion from 1 October 2020; Investment performance across CLIG’s investment strategies was “strong”, following “significant discount narrowing” and “good NAV performance”; Rebalancing of client portfolios resulted in US$ 290 million of net outflows.
Companies: City of London Investment Group PLC
Finals (9mths to Sep-20) are in line with expectations. Recurring fee income from 3rd party AuM (incl. PRSR) ensured solid profitability. The balance sheet is well resourced with £26m to develop seed assets. With a positive outlook following the launch of the £1bn JV with EQT, we see accelerating returns over the medium term. PRSR is also on track to materially complete the initial 5,200 portfolio this year. Sigma trades below our 200p+/share intrinsic valuation – which attributes no value to AuM growth, which is a strategic priority.
Companies: Sigma Capital Group plc
Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5 million by way of private placement of new Common Shares (the "Fundraising") to advance the United Downs copper-tin project. The Company expects that Admission will become effective in February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb. Moonpig, the digital greeting card company, is planning an IPO with a potential valuation of £1bln, according to multiple media reports. Further details expected to be announced over the next two weeks.
Companies: ZPHR PANR PRSM SENS CYAN G4M ITX CRCL FEN ZIN
Allied Minds has announced that Joe Pignato has decided to step down as CEO and from the board with immediate effect. However, he will continue to support the company as CFO for an interim period as the board continues its search for a permanent CFO. As part of a streamlining process, Allied Minds will now become a board-led company with no immediate intention to appoint a new CEO. The chairman and NEDs (experienced VCs and private company investors) will represent Allied Minds on portfolio company boards (including Federated Wireless, BridgeComm and Spin Memory) with an intention to accelerate realisations where possible.
Companies: Allied Minds PLC
Sirius Real Estate has been a stand-out performer within the UK listed commercial real estate sector over the last three years, delivering a total shareholder return of 107%. The shares also offer a valuable portfolio diversifier for investors, with a geographic focus on Germany, and a focus on pro
Companies: Sirius Real Estate Limited
Redde Northgate has come through the COVID crisis in very good shape so far. We expect minimal impact on the former Northgate business from “lockdown 2.0”, a strong recovery in profits and a re-rating as normality returns and Redde reverts to mean. We could see further useful earnings upside from acquisitions such as Nationwide and revenue synergies not yet included. The Group is transforming itself into a mobility business which is higher returning, more diversified and has sustainable compounding growth prospects.
Companies: Redde Northgate PLC
Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC Due mid Jan. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. Due 14 Jan. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: IUG CBP KAT APP RST DIS NICL BOKU CNIC HE1
Urban Logistics REIT (“REIT”) has acquired another high quality “last mile” asset in the Wirral for £16.3m (5.0% NIY). The 169k sqft site is let to a subsidiary of Culina. It is leased through to 2032 and has clear rental progression, with an uplift on commencement of a reversionary lease in 2022 and a rent review in 2027. 99% rents for the Jan-Mar quarter have already been collected – highlighting the resilience in the tenant base/income. We do not change forecasts, already assuming full deployment by year end. We estimate that c.£75m capital capacity remains. We note a 6%+ dividend yield in FY22e – a 12m period of full capital deployment – and note that the discount ignores embedded NAV growth potential.
Companies: Urban Logistics REIT plc
Pacific Horizon (PHI) generated a very impressive uplift in its NAV over the course of 2020. This reflects its focus on growth, and technology and biotech stocks in particular. These performed well as we attempted to adjust to life under the pandemic, thereby accelerating a number of structural trends. PHI provided an NAV total return of 86.1%, which eclipsed the return on the MSCI AC Asia Pacific ex Japan of 21.2%, the broader MSCI AC World of 12.7% and the average of its Asia Pacific sector peer group of 25.3%. PHI is the top-performing trust in this sector by a significant margin. Despite this stellar growth, PHI’s manager is not resting on his laurels. Emerging Asia still remains a high-growth and underresearched region, and he continues to focus on those themes he expects to do well over the next five years. For example, EV continues to be a significant theme and the manager has been increasing exposure to the commodities needed to deliver a greener future, but which the world is structurally short of, following long-term underinvestment.
Companies: Pacific Horizon Investment Trust
AuM grew by +43% (+16% organic) to £29.4bn in Q3. Investment performance was strong (+£2.5bn) as COVID vaccine news propelled markets. Net inflows were maintained qoq (£792m). Sustainable was the stand out performer (+24%). AuM has broken through £30bn post-period end. Better than expected AuM drives +3% FY21e EPS and +5% in outer years. Continued distribution efforts in Sustainable, Global Equity and Multi-Asset funds stands to catalyse earnings. Alongside flow momentum, 12x FY22e PER is not reflecting this upside.
Companies: Liontrust Asset Management PLC
Martin Currie Global Portfolio Trust’s (MNP’s) manager Zehrid Osmani reports that his ongoing focus on long-term structural, sustainable business models was beneficial for the fund’s performance during the coronavirus-led market sell-off in Q120, with portfolio companies undertaking measures to protect their brand equity. He is encouraged by a general increase in investor awareness of environmental, social and governance (ESG) issues, an area of research that Martin Currie has focused on for several years, as he believes that ESG improvements can lead to higher total returns for shareholders. MNP’s performance has improved since the appointment of Osmani in October 2018, and its NAV is now ahead of its benchmark over the last one, three, five and 10 years.
Companies: Martin Currie Global Portfolio Trust
Litigation Capital Management has announced FY20 results with gross profit up 7% to A$21.7m and PBT of A$9.2m, slightly behind expectations albeit the Group had already flagged that delays to 3 cases during the year would result in resolutions in FY21, thereby impacting FY20 results. That said, excellent strategic progress through the year and good news flow as well as increasing scale suggests more value to come. Reiterate buy
Companies: Litigation Capital Management Ltd
Manolete has announced a good set of interim results with strong growth across the board and good operational momentum in case investments and completed cases. The shares have been on a wild ride through 2020 and look genuinely inexpensive on an earnings basis, accepting that cash will continue to be invested in new cases, we see good value here. Buy
Companies: Manolete Partners Plc
Pacific Horizon (PHI) generated a very impressive uplift in its NAV over the course of 2020. This reflects its focus on growth, and technology and biotechnology stocks in particular. These performed well as we attempted to adjust to life under the pandemic, thereby accelerating a number of structural trends. PHI provided an NAV total return of 86.1%, which eclipsed the return on the MSCI AC Asia Pacific ex Japan index of 21.2%, the broader MSCI AC World of 12.7% and the average of its Asia Pacific sector peer group (see page 23) of 25.3%. PHI is the topperforming trust in this sector by a significant margin. Despite this stellar growth, PHI’s manager is not resting on his laurels. Emerging Asia still remains a high-growth and underresearched region, and he continues to focus on those themes he expects to do well over the next five years. For example, companies exposed to the growth in electric vehicles (EV) continue to be a significant theme. The manager has been increasing exposure to the commodities needed to deliver a greener future, but which the world is structurally short of, following long-term underinvestment.
