Plus500 Share Discussion Threads

[simplethesis] 29/10/2020 13:59

PNL could be big, in either direction, in any period, yes. That is unknowable. We have seen numbers of +/- $80m this year. I do know however that CI will be at a level which makes a mockery of $430m revenue estimates in 2021. The market learns both numbers at the same time, and one of them is worth a multiple of zero, while the other is worth at least ten times the resulting earnings. The stock will trade with the direction of earnings expectations. Whatever the PNL/CTP in Q4, it has zero impact on the evolution of earnings expectations.

[oi_oi_savaloy] 29/10/2020 13:25

Simplethesis - thank you for your excellent response; I don't doubt that the numbers Plus are going to deliver are in excess (probably way in excess of) their written rns but I've been caught out before (buying Plus and then seeing the share price tank, rather like my disco dancing did at a rave in '89......) and just need the reassurance that this Board has considered all sides of the argument.

I seem to remember we've been caught out by PNL going the wrong way for Plus before (last year?). As crazy as Djokivic1 has explained it (really, really hard for PNL to go against us) there's still that possibility of Plus being on the wrong side of that (and that's possible right?)

[mighunter] 29/10/2020 12:35

Thanks for the expansion ST, a really useful narrative

[simplethesis] 29/10/2020 12:03

as ever, djokovic1 puts it far more succinctly. I don't disagree that Q4 could be $200m of CI.

[simplethesis] 29/10/2020 12:02

Hello oi_oi_savaloy. You ask a good question, and certainly it is right to remain objective. The difference between this business and most others is that here you can disaggregate income into Customer Income (CI) - spreads and overnight charges- which over time are 99% of revenues, and Customer Trading Performance (CTP), which is the volatile customer P&L, the daily mark-to-market of customer gross wins and losses. CI is all that matters for future value of the business, while CTP has a NPV of close to zero.

The company referred to "extreme monthly trading movements within the quarter". The book is huge, and the swings in CTP over the quarter will have been big, or, as the company says, "extreme". The issue is that the company must guide on revenue, while it can only really predict CI. It has been specific on CI, saying that "This gradual reduction from peak levels has continued into Q4". Q3 CI of $240m was 26% down on Q2. if you applied the same decline rate into Q4, you would have $177m of CI.

How would $177m of CI be arrived at? If you had an elevated churn of 30% in Q4, then 30k new customers, down from 46k in Q3, then a $1050 ARPU ex CTP, down from $1212 in Q3, then you would get to $177m. I would note that a $1050 ARPU is the level you were at in the low-volatility H2 2019, so that's an extremely conservative assumption, as is 30k new customers. So I believe $177m is a sensible estimate. More than this, any less than $165m is extremely improbable.

So, if CI is close to $177m, two questions: [1] could revenue be $50m and [2] would it matter? We saw -$76m CTP in Q2. If you saw all asset classes shoot up, could Plus500 see very big -ve CTP? Well, it's important to know how swiftly reactive this business is. The moment limits are reached, the company widens spreads and reduces leverage available on that instrument. In essence, they can apply brakes very swiftly, in part by making some instruments too expensive to trade. They did this after markets shot up in late May. A colleague noted yesterday that the risk the company is allowing clients to take on Tesla, e.g., opened up again, which suggests to me that the brakes are not being applied. You need to understand the dynamic between CTP and CI, which is that it is important that the client can access enough leverage to make money in the short term, but the spreads are making money for Plus500 all the time. A period during which clients see good CTP is just one in which the rate of revenue generation for Plus500 slows, temporarily. It does not mean that the lifetime value of those clients has decreased.

And if in early January the company announces something like my $177m CI number and 30k new clients, and then a substantial CTP negative, what happens? Well, the $430m FY21 consensus revenue needs to be understood as being post the reduction of leverage in Australia at the end of Q1. That means it's $454m "pre ASIC". The maths is one quarter at $114m, then if you put in an extreme worst case reduction of 65% on 11% of total revenues in Q2-Q4, consensus suggests $106m for each other those quarters, summing to $430m. Consensus then suggests that a business which does $177m in Q4 somehow sees a 36% fall in CI in Q1 2020? Not going to happen. When such a Q4 number of CI is announced, it will be obvious that 2021 revenue numbers are too low. Whatever CTP is, that will immediately be in the rearview mirror.

Using another perspective, the average revenues of the last two quarters of 2019, which were very low vol. times, were $104m (ex CTP), from an average active client base of 105k clients. $114m would be just under a 10% uplift on that run rate. Is that likely after a year in which the marketing spend will have been *more than twice* the investment of 2019? No. I think 2021 revenues will be closer to $600m. The high broker estimate now is Canaccord at $526m. The others will go in that direction over time.

[djokovic1] 29/10/2020 11:29

Well I don't see any reasonable way that guidance could be right and that they only hit consensus in Q4 and dont significantly surpass it.

The only way guidance could be accurate is if you have a huge negative customer pnl number (~150m) to negate the ~200m customer income I would expect in Q4. But given how markets have behaved so far in Q4, I dont see any reason to expect that (especially including that last few days).

[jamessmith23] 29/10/2020 11:26

Based on their business model its not really possible for them to only achieve their full year forecast unless they have made some sort of huge operational error, which is possible, but would have likely been mentioned in the TU.This is because their costs aren't directly related to revenues, they don't really have variable costs like most businesses and so as long as revenue is there they can't really make loses, if you see what I mean. As they have 200k active customers and with COVID, brexit and the election I don't understand how revenue could drop to 50m for the last quarter unless they had to ban 75% of customer accounts based on some regulation or something, which I'm not aware of.There is a small risk in continuing to hold with the question mark of an update, but overall picture is good and I continue to hold, it already makes up 10% of my portfolio due to performance and won't top up above that, but would see 1400 from yesterday as a good topping up point.

[oi_oi_savaloy] 29/10/2020 10:57

There are some much better informed people on here than me but as I posted in the other thread - could it be that we're all reading too much into the rns and not reading it for what it says? ie that somehow things have gone badly wrong and that despite an epic year so far that plus really is going to end up where the consensus forecasts have said (which means an appalling Q4 performance)?

I've read thoughts and analysis on here and on other forums (LSE where I post about INL mostly - as I'm far more heavily invested in that business and my actual career is in the same sphere as what INL do) but no one has mentioned it so thought I would.

Plus isn't well-liked by alot of people(for myriad reasons that we all know about) but could it be they've told us what we don't want to hear and have simply ignored it because they couldn't possibly be right? And yet.....

[johnkettleyistheweatherman] 29/10/2020 10:43

youre just a low life gasper

[elcapitalthegreat] 29/10/2020 10:33

indeed nod, he is just a troll

[johnkettleyistheweatherman] 28/10/2020 22:38

awesome post - think ill do the same to you moron

[nod] 28/10/2020 21:00

The best feature on advfn is Filter.

johnkettleyistheweatherman27 Oct '20 - 10:17 - 24439 of 24448 (Filtered)

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[energeticbacker] 28/10/2020 16:51

Featured in today's Investor's Champion update – Plus has done nicely from the heightened stock market volatility and has also benefited from a further cash windfall. The 7%+ current dividend yield looks appealing but shareholders shouldn't count on this largesse every year.

[chucko1] 28/10/2020 14:58

This volatility will get bums back on seats. Not sure how the update squares with a rewind to March/April volatility. The becalmed accounts may reactivate but in any event, likely belonged to the low-ballers.

Bought a few yesterday - more today.

[jw330] 28/10/2020 13:17

No matter the situation the management should be doing better in terms of communication. They are allowing the press to print these kinds of stories which isn't going to help the situation. hxxps://www.thetimes.co.uk/article/spread-betting-market-is-cooling-warns-plus-500-76fkk2glk

[oi_oi_savaloy] 28/10/2020 11:01

Unless Plus are telling us that things have gone disastrously wrong with their performance against their customers (don't they hedge positions etc) and that things really have gone wrong? Just trying to think why they'd write what they've written.

[johnkettleyistheweatherman] 28/10/2020 08:51

gasp for us piggie

[johnkettleyistheweatherman] 27/10/2020 19:43

get gasping filth

I can hear it from here


loving it

[markbelluk] 27/10/2020 16:50

Jefferies:-

The favourable conditions have so far enabled Plus500 to build up cash of $723 million, about half of which analysts at Jefferies estimate could be available for distribution to shareholders or set aside for acquisitions.

The broker said: “We assume a $50 million special dividend this year, although this still implies considerable headroom for further distributions and/or acquisitions.”

Liberum, which has a price target of 1,950p, said today’s better-than-expected third-quarter performance also reflected the benefits of the group’s best-in-class trading platform: “Its scalable technology and agile marketing algorithms has enabled it to win significant market share and drive continued improvement in financial returns.”

The City firm increased its full-year earnings forecast by another 8% and pointed out that shares were still only trading on 4.8 times 2020 earnings.

[base7] 27/10/2020 16:09

I agree- assuming the majority here are long, why would we want to de stabilise our share price further -although Buys seem to be outweighing sells, despite the mark down.
I suspect Rob has a standard response to whinging emails as I received mine shortly after seeking clarification.

[chucko1] 27/10/2020 15:56

Sod the journalists - stick to the facts. PLUS is in great shape and it has always been cheap because of the nonsense IR. But that is why there is so much money to be made - try and ignore the noise. If you cannot, tough, because this is a noisy share.

Can we also cut the whining a tad!!

[andrewbaker] 27/10/2020 15:37

The share price fluctuates more like betting odds than a business making money on betting, which is effectively what Plus500 is. If it drops any lower, I'm buying more (and might do anyway).

[handykart] 27/10/2020 15:06

If you did get journalists to run a story, I suspect they would sensationalise it. This is what they do. I suspect they would look at Plus500 past history, and come up with some negative opinion, which will not be good for the share price, and us shareholders.Might be worth bearing this in mind before e.mailing them.