Plus500 Share Discussion Threads

[rhatton] 21/2/2021 16:55

Anyone heard about IG beginning to ask 100% margin or no longer offering on around 600-1000 companies / ETFs. Saw it on the IG thread, little bit on Twitter too

[coxsmn] 20/2/2021 13:53

Not at the moment, so currently ignoring a huge market.

[rhatton] 19/2/2021 15:26

Yep correct, just wondered if they already offer share dealing to US clients.

Be interesting to see when plus open up share dealing which geographies it will be targeted at

[coxsmn] 19/2/2021 15:21

IG are in the process of acquiring tastytrade in the US

[rhatton] 19/2/2021 15:16

Do IG offer the share dealing side of things In the US?

Could be great for Plus to be getting a slice of that market

[coxsmn] 19/2/2021 15:05

There's obviouslly a huge opportunity in the US where i hope Plus can become a market leader.

[chucko1] 19/2/2021 00:14

Well, at least I got one thing right. More than I did yesterday - I meant to buy when the share price was off 40p, but got distracted by other things, namely some other shares, some wine and some cake. Got enough to be going along with anyway, but I felt the market reacted ignorantly yesterday (if a market can do such a thing) and it was well worth a trade.

[simplethesis] 18/2/2021 22:25

Cheers Chucko. They’re not house broker to PLUS. That’s Liberum and Credit Suisse. CS doesn’t write on them. The AZN point probably stands.

[chucko1] 18/2/2021 21:49

Be thankful, ST, that CGF is merely the house broker for PLUS - imagine if they were tasked with the data analyis for the Oxford/AZN trials.

[simplethesis] 18/2/2021 18:06

Groan.

The CG price target came from a 29 September note in which Mr Bates reckoned the business would do $526m revenues and 185p EPS in 2021 and $406mm revenues and 115p in 2022. He put a 5% discount on a long-run 8.7x multiple to value Plus500 at 8.3x that 115p.

By valuing the company on FY22 "normal" EPS he was explicitly ignoring the profits earned before that time. He had $148m PAT in FY22. He had Plus500 earning $272m PAT in FY21 and $529m in FY20. So that's $124m of "supernormal" profits in FY21 and $381m in FY20. They add up to $505m.

At a 958p price target with 105m shares and then a 1.286 FX rate at the time, that's a $1295m valuation of the company. The $505m of "supernormal" profit which he implicitly discards is 39% of his target price. That seems not great.

High churn was part of his reasoning. He estimated 45% churn in 2020, then 60% in 2021. The 2020 churn rate ended up being 30%. Somehow the CGF target price is unchanged. Curious.

He estimated 100k new clients in 2021. Let's see how Q1 pans out.

In the same report he values CMC at a 5% premium to IGG's 14.3x historical average 1y forward multiple. He uses CY22, but has CMC's March '22 and March '23 profits at the same level, because he believes it can recycle profits to create growth. This reminds me of another company.

The essence is that CGF has CMC's FY to March '23 profits at 45% of the level of FY21, while it has Plus500's 2022 profits at 34% of 2020. As ever, this is driven by an annual customer churn assumption. What he misses, despite having been the company's broker for years, is that all customers are not equal. The customers in any cohort who stop trading first are the ones with the shallower pockets. Yes, Plus500's customer churn is high compared to peers, but it has a huge number of lowish value customers from whom it makes good returns, having as it does a low cost online process and support function, and then it has 9% of customers who are > 90% of the revenues. As a result you would expect high churn in terms of customer numbers, but this has little bearing on the decay rate of a cohort's revenues.

Nowhere does he understand that the c. 300k new customers in 2020, the result in great part of $221m of marketing spend, will have lasting value. The company gave us cohort revenue data in August and again just now. It looks like the 2020 new customers only generated, at a maximum, $170m revenue in the year. They will generate that sort of number again this year, i.e. a lower run-rate but in 2020 they were on average only there for a little more than half of the year. Look at the 'High return on Marketing Investment" slide and you will see that that sort of year two revenue return on marketing spend is typical.

As for current expectations, the company did $382m of customer income in 2019, with only 77k customers carried from 2018 into Q1 2019. 2019 had really low volatility.

This year it will start with c. 165k customers carried from 2020. It is expected to do $430m revenues after what I estimate to be a $22m hit from lower leverage in Australia, so $452m before that. Is it realistic that you spend $221m on marketing to drive so little growth over the low-vol 2019 level? Exceptionally improbable.

I have 2021 customer income of $690m, revenue of $590m. 55k new customers Q1, then a low 24k assumed in subsequent quarters. A low $980 quarterly ARPU is assumed, then lowered by ASIC measures. At 1408p the stock is on 6.3x my this year forecast of 223p. Consensus is at 144p.

It seems conservative to expect the company to trade to 10x, with these returns. If the stockbroking product and other non-trading product are well-received, and the moderate external hedging is understood to be reducing quarterly revenue volatility, then the multiple will be higher. Of those 10 million downloaders of the app from the Google store, perhaps some, who do not want to trade with leverage right now, might be customers in another way?

[scepticalinvestor] 18/2/2021 14:26

so the company will be buying millions worth of shares but the cannacord analyst reckons the price will drop by 50% lol

[chucko1] 18/2/2021 11:08

That's a remarkably dimwitted analysis from CG. Raising capital for PLUS has hardly been an issue thus far - they wait a few months and it appears as if by magic (earnings!).

Even if substantial capital were required, a large part is already in the bank and the remainder, at whatever marginal cost, is easily compensated for by the attraction of the more varied revenue spread. The latter is key, not the former. But CG can call it whichever way their own mood takes them. Along with the FT, it's always a bad one, it seems.

[rhatton] 18/2/2021 10:42

“ Canaccord Genuity was at the other end with a sell rating, noting a lower payout ratio and investment plans the company announced that will need funding, such as expanding CFDs to new geographies, and new financial products for customers.”
In with a SELL rating of 958p as of yesterday

[scepticalinvestor] 18/2/2021 09:04

Lovely - mkt starting to take notice

[jamessmith23] 17/2/2021 22:17

I assume that's why they are paying a smaller dividend than some expected, in fairness the dividends and buybacks has resulted in $280m of value in 2020 which is a yield of c14% so I can live with that. They have a huge amount of cash, and are likely to be looking at putting that to use internally through R&D, although a mention of 50m over 3 years suggests they may be looking at m&a.Agree if they do acquire in this market you could be over paying big time, personal view was IG did.

[rhatton] 17/2/2021 18:10

US expansion talk sounds interesting

[djokovic1] 17/2/2021 18:06

Strong update in my view. Large and growing number of actives. $2.9 bio in customer funds. Lower churn. CAC vs LTV looks very good. More talk and Foucus on longer term initiatives may lead to more institutional investors and a re-rate. Only surprise was that forward outlook wasn’t more bullish. I would expect much much better than surpassing 2019 numbers

[rhatton] 17/2/2021 17:56

As usual FT stick the blade in.
Talk of 4.4% dividend looking ‘shaky’ and the hedging strategy not worthy of a re-rate....typical

[jw330] 17/2/2021 17:23

On paper this company looks deeply undervalued and people in charge seem to be making the right noises to get the company back on a higher valuation. The only concern is the M and A bit. Lets hope they spend wisely and not overpay for companies. Its going to be hard in a frothy market place I think.

[scepticalinvestor] 17/2/2021 17:01

literally my only holding that is blue today

[jamessmith23] 17/2/2021 16:53

I'm hoping for the business to be able to produce at least c$300m of profits per year on an average bases going forwards, this was a very good year but they also doubled their marketing spend and so can imagine they wouldn't do that in harder years as they'd want to smooth profits if possible.If you add in new products and hedges to the point where instead of $300m being an average and annual profits swinging from 100-500m moving to a consistent $300m and hopefully growing, then it becomes a much safer business and as soon as that happens, investors will price it mugh higher.Ideally like to see a PE of 12, which would put it on about £24 with a conservative estimate of $300m for profits going forwards. This is in line with peers that are 12-15 and isn't factoring the ridiculous amount of cash on the BS.

[rhatton] 17/2/2021 16:46

Some of the news articles / coverage are at least moving into a shade more positive direction than normal which is a bonus

[mister md] 17/2/2021 15:34

yes, good to see the 'sell on the news' didn't last long

[investing2retire] 17/2/2021 15:05

yep looking good from this base

[scepticalinvestor] 17/2/2021 13:01

I think we can expect a rerate from here