Ig Share Discussion Threads

[orinocor] 13/12/2016 11:20

Numis have 28.9p eps for next year.

Wherever you got 36p and 7.5% yield from it looks wrong. They are paying 70% of profits as a dividend and 36p of earnings would give a 5.6% yield not 7.5%

[deanroberthunt] 13/12/2016 11:17

if you could buy this for the current mcap minus the cash at bank, with cash generation, the payback would be 4-5 yrs......most work off 8-10

[deanroberthunt] 13/12/2016 11:16

Oreo has just used the worst of the worst case of all the consensus forecasts

[deanroberthunt] 13/12/2016 11:12

the new broker consensus eps is 36p, with a pe of 12.2 and a 7.5% yield...for 2018

deal with facts not hope...updated in my dealing account

[bolador] 13/12/2016 11:09

orinocor

A general fall in the market could cause a fall to 400 regardless.

But things do not usually turn out as bad as they might. IG will no doubt make their own representations to the FCA, the FCA will no doubt confer with their European counterparties and the result will be a temporary fall in revenue for IG but nothing like 40% due not only to their customer profile.CFDs provide a valid function for the hedgies and in any event IG is diversifying the revenue base and has approximately 90/100 pps cash to speed that process.
A pe of 15.5 does not look cheap but that figure is predicated upon probably incorrect assumptions about the revenue decline.
I bought a few this morning and will try not to look at the share price every five minutes.
The IG share price will take time to heal from this shock.

[orinocor] 13/12/2016 10:49

At 450p the forward PE of 15.5 and forward yield around 4.5%

So its beginning to look fairly priced even with the regulatory concerns. However in my eyes its not a bargain yet and I suspect it may fall to 400p at some point.

[deanroberthunt] 13/12/2016 10:42

what about commission on the trades and overnight charges?

[deanroberthunt] 13/12/2016 10:39

@garycook

nope, I'm fine, thanks for your concern at this time of year, appreciated.

I'm just a compulsive poster :)

[diggedy2] 13/12/2016 10:38

somehow IG has managed to get people to think that its revenue is not made from clients losing money

they do this by talking about making 'the spread'. The spread being the difference between the bid and the offer. But this is disingenuous. Whilst it is true that when you divide the total revenue made by the number of trades it works out that IG (and the other major players) make 'the spread'.

But this hides the fact that every single penny made by IG is made from the clients and from nowhere else. Yes , they may make or lose a small amount of money hedging (on the rare occasions when they need to hedge) but this merely disguises the real income stream.

IG makes around £2,400 each from its clients. These are client losses NOT some form of commission or hedging profit.

[garycook] 13/12/2016 10:37

deanroberthunt,No comment on my post.You must be hurting real bad !!!

[deanroberthunt] 13/12/2016 10:22

If it ever transpires...

[deanroberthunt] 13/12/2016 10:22

or they could buy another firm with the cash?...that would offset the revenue decline

[cw2000] 13/12/2016 10:13

Some pros and cons discussed above.
I think that to maintain their profitability, the spreads will increase on most trades.
Recently Finspreads quietly increased their spread on the DOW by 60%. I anticipate this is the way ahead - get used to wider spreads!
Don't have a holding but monitoring events.

[tsmith2] 13/12/2016 09:40

The Market reaction to last Tuesday's news that the FCA was proposing stricter rules for CFD products was predictably savage. What surprised me was that IG Group (IGG) led the way with a 40% fall whereas Plus 500 (PLUS) fell "only" 27%. Since then IG has continued to weaken ( 470p at the time of writing) whereas Plus has rallied a little (373p ditto).The discrepancy can perhaps be explained by the fact that it transpires that Odey Asset Management, had blundered into the market to average down on Plus 500 helping to cushion the fall. Also noted was the fact that, as Plus was quick to point out, only 20% of revenues come from the FCA regulated subsidiary.In contrast IG Group whinged about "certain firms, often operating from outside the UK" not being directly affected by the proposed changes, a clear reference to the likes of Plus 500, thus it would seem underlying its own greater vulnerability, due to its larger exposure to FCA regulation.But I think market has misread the risks to both firms. IG Group is clearly the "bluechip" of the sector as evidenced by its 18x PE on Monday night which has now been slashed to around 10. IG has been quietly diversifying into stockbroking and Asset Management and will survive the changes in rules by the FCA without too much disruption to its business model which is not reliant upon its clients losing money.It is precisely the practices of the likes of Plus 500, which are being targeted by the FCA and I think it naïve to suppose that the company will be able to carry on as before by simply switching UK clients to Cyprus, bypassing the FCA. The spotlight is now firmly upon the sleazier aspects of the industry and I believe that the Cyprus regulators will be forced to act in a similar vein, at least as far as UK and other European citizens are concerned.This poses an existential threat to Plus 500. Its rating is now 5.6x last years earnings down from 8.1 prior to Tuesdays fall. This may look cheap but don't be fooled. Plus's business, unlike that of IG, is heavily dependent on its clients losing money by allowing them to take highly leveraged bets against the house. Ie its profits, to a far greater extent than IGs, derive from client losses.It is, in short, this type of business that the European authorities (German regulators BAFIN have now followed the lead of the FCA) are targeting and if they succeed then Plus 500 has no business. This would be good for the less flaky players and IG Group is the best of these. I stay short of Plus 500 and have gone long IG Group at 470p.- See more at:

[garycook] 13/12/2016 09:40

drh,It seems you are covering every angle possible to get the share price higher,because you must be hurting big time from your losses in IGG.Just double up,and grin and bear it.Collect the dividends,and wait for the share price to recover.Out of interest what do IGG owe you ?

[deanroberthunt] 13/12/2016 09:30

wouldn't be surprised if certain entities are running the rule over this....

£0.5bn cash and generates £200m fcf

[bolador] 13/12/2016 09:29

Anyone worried about the effects of tough regulation on a fundamentally good business should have a look at the share price graph of BAT over the last few years.
Amazing !

[deanroberthunt] 13/12/2016 09:20

be funny if they hike the dividend

[deanroberthunt] 13/12/2016 09:20

even on the revised numbers it's cheap, if they don't come to pass, then it's the steal of a decade

[dusseldorf] 13/12/2016 09:06

diggedy2 - I don't really see much of an impact if changes are pushed forward in 6 months time. As an investor I work with the single transaction trade size and take out multiple positions to gain the exposure I'm after across the stocks I'm interested in. If a market is limited in one stock, I will diversify into another and so on.

At the end of the day, as a retail investor I'd simply be taking out twice as many positions if individual multiples halved. regulation will not really change what investors are doing, only the amount they can place in any single stock.

IG may need to 'fine tune' where and how much commission they make on a transaction, but so will everyone else - there is no competitive advantage lost and people will still use margined trading with the same cash they used before any regulation update.

[mitreatrading] 13/12/2016 08:55

CMCX up 2.1%
Igg creating support at 450 ?

[deanroberthunt] 13/12/2016 08:54

diggedy

I have new broker consensus forecasts for 2018.....

Pre Tax £171m
EPS 36p
PE 12.2
Yield 7.5%

that pre-tax accounts for the brutal drop in revenue.

[diggedy2] 13/12/2016 08:48

Lots of people trying to bolster their hopes here but the simple fact is that any maintenance of historic revenues on multiples of 25 times (for new accounts) and 50 times for everyone else will be murderously difficult to achieve.

IG will have to cost cut to the bone which will be tough as staff numbers are not really dependent on trade volumes (hardly anyone calls to trade these days) and anyway trade 'volumes' will probably not decline a great deal. The thing that will fall is the trade 'size'. This is likely to drop by up to a factor of 8 (for new accounts) and 4 for old accounts ... but will more probably fall by about a half overall.

Accounts will also have less spare funds for those 'tempting trades' which make the Spread Betting companies so much dosh.

If trade sizes drop by a half then this will severely impact revenue which was always a multiple of size times spread.

Not only this but the 'cigarette health warning' that the providers will have to put on account opening forms will put off a lot of potential new clients. And the cost of client acquisition will go up (it is already reputed to be around £900 a client)

All in all the overall drop in revenue may well be higher than the broker touted 37%.

Given that IG works on a 50% margin (approximately) a 37% drop in earnings would leave them on a profit of just 26% of pre FCA levels. Of course IG will make adjustments which will negate some of this but make no bones . The fall of 50% in the share price is NOT oerdone.

[dusseldorf] 12/12/2016 15:51

a 50% price decline or market cap reduction of £1.6bn in 4 months (from 1st Sept high) is somewhat brutal.

IG makes money when markets are volatile, Trump has stabilised things somewhat (suprisingly!) though IMO next year the party for markets will be over (Superunicorns etc..), but the party at IG will just be beginning.