Stm Share Discussion Threads

[smithie6] 12/9/2020 13:16

some data per share performance over recent years

A) yr to Dec. '14. 2014.
no. of shares 53 million & 63m diluted
turnover = £15.9m
per diluted share = 25.2p

net cash £5.7m. per diluted share = 9p

B) yr to Dec. '19
no. of shares 59.4 million & 60.4m diluted
turnover = 23.3m
per diluted share = 38.6p

net cash £17.2 m. per diluted share = 28.5p

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performance

- turnover per share up by about 50% wrt 2014 (25.2p to 38.6p /diluted share)

- net cash per share
up from 9p/share to 28.5p/share
(& if had retained cash paid out via divis it would be 28.5p+ ~7p = 35.5p !; from 9p to 35.5p cash/share in 6 years, impressive !)

about x3 what it was !!

& 28.5p/share is 75% of the share price, whereas it was perhaps 24% in 2014 (if take the share price as 38p, share price rose to 70p at which time the cash/share as a % was much lower of course)

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at many small AIM cos. they keep raising money by issuing new shares...while the perf. data "per share" normally/often keeps falling
at STM you can see that the number of shares is about the same in 2020 as it was at Dec 31 2014.
So the various acquisitions made during the intervening years have all been basically/overall funded from profits !, improving the per share data. Excellent.

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good numbers imo
with the high cash /share surely giving good downside protection for the share price, coupled with the high recurring revenue

...hopefully the profit numbers will improve over the next 2 years as the BOD expects (with the share price following along)

[smithie6] 12/9/2020 10:43

interesting

in March 2015 the co. reported annual eps as 2p (a big jump from previous year)

& in 2015 the share price climbed up to 70p in the months after those results

yet now the turnover & profit per share are higher (turnover up 50%) but yet the share price is just under 40p !
undervalued imo.

[smithie6] 12/9/2020 10:33

STM group as a possible acquisition target

possible buyers
- XPS pensions ? lse:xps
cap. value of about £246m
- other pensions companies
- AJ Bell (& off pensions/STM products to big number of clients
- Abbey wealth, do stuff for expats

but I'd prefer for STM to keep growing as it has since at least 2012, doubling turnover !! (excellent) & increasing
the profit

compounded on-going growth will produce much bigger gains than a one off gain due to a takeover

(if you want to get rich, just clock in 15-20% gain per year (doesnt sound so much) & after 20 years you will be a lot richer. & even more after 30.

[smithie6] 12/9/2020 10:14

2012 Revenue GBP 11.6m
2013 Revenue GBP 13.4m

----------------------------- --------- ---------
Earnings before interest, taxation, depreciation
and amortisation ("EBITDA")

2012 GBP 0.9m
2013 GBP 1.0m


Compare those numbers with now !
the co. has produced excellent growth in an environment where growth is difficult to find/achieve.

& imo such past growth & hoped for future growth (borrowed ~£5m for acquisitions & 1 has been done & other(s) is being looked at) is not at all reflected in the current share price.

[smithie6] 12/9/2020 10:06

Hi Brian

interesting

I've been in STM for some years as well, going back to when they didnt pay any divi & a divi was a hoped for future event ! (2011-2014 I guess !!) (which started again in June 2016)

& since then they have paid about 7p in divi, & still got good numbers for finance & stability/risk, =very good imo.

it might be a dull wait for cost cutting (& implementation of new IT) to increase the EPS & the share price
but for me its a very good risk/reward situation noting the very high level of recurring revenue.....by just turning the handle over some time it should happen imo.

[smithie6] 11/9/2020 16:16

btw
the RNS from 27Nov. '19 makes an interesting point about the price increase in Prof. Indemnity insurance creating opportunities for acquisitions "as some firms will look to exit the market as a result of these increases"

so hopefully STM will pay less
& at some time we should get an RNS for another beneficial acquisition


"Outside of our control, there has been a seismic change in the Professional Indemnity insurance market capacity resulting in disproportionate increases in premiums. Certainly, this is likely to remain the case for the next couple of years until the insurance cycle moves on. Ironically, opportunities will arise for acquisitions as some firms will look to exit the market as a result of these increases"

[smithie6] 11/9/2020 12:45

cameron

I re-visited an older post of mine & added more praise of the benefits to UK Plc of tax incentive things like private pensions, SIPPs, ISAs, VCTs....all of which I'm in favour of

while personally I think that places like Cayman Islands, Switzerland, Panama should be closed down

(those places have been used by the super rich to avoid paying taxes they should be paying (& even used by the previous Spanish king, 60 million €; which might cause the downfall of the monarchy in Spain in the coming years)

[smithie6] 11/9/2020 08:32

good points

(Im a big fan of things like private pensions, SIPPs, ISAs, since imo they to get ppl to think & plan for their financial future (an area where the UK is light years ahead of imo all of the rest of Europe) & hence to be responsible & plan ahead; & having ppl being more responsible is good for UK Plc (those 'responsable' ppl will also hopefully also think about their career & more learning/education which is good for UK Plc; whereas ppl living day to day wont be).

(the highish annual UK allowance for CGT also encourages ppl to phps put some money in the stock mkt & that is good for funding business & hence jobs & UK Plc; in most/many countries in the UE there is no CGT allowance or ISAs & hence the general public do not invest in shares 'cause they pay 50-70% on any quick gain, so, in those countries many new ventures or growing companies can not raise money)

(& I mentioned that the tax incentives of things like VCTs help provide funding for high risk small companies (often involved in new products/technology) which are important for the economy of UK Plc).

(you put "evasion" 2 times in 1 sentence near the end of your post & I think you phps intended to use "avoidance" the second time)

[camerongd53] 10/9/2020 22:56

We should be more careful in the use of language a things can be misconstrued.

Some locations or tax havens can be used for evasion of taxes in other locations which may be and is often illegal.
Off shore locations can be used for avoidance and or tax deferral and is not necessarily illegal.
When discussing taxation compliance etc. , the term evasion is assumed to be illegal. Avoidance which may have the same effect as regards payment of tax is however legal. Sipps Isas and pension schemes are if used correctly are all legal forms of tax avoidance.
I do not believe that STM offer tax evasion, but may be (ab)/used for tax evasion. If STM were involved in tax evasion, I would not be investing in them as their business model is not likely to be robust in the long term.
Subtle but fundamentally important

[smithie6] 10/9/2020 19:52

anyway

Brian, you seem very knowledgable about STM history & details

you hold STM shares or not ?!!

[smithie6] 10/9/2020 19:50

Brian

can you tell us more about the Aussie Superannuation Scheme

...I didn't know about that

======

that a co. that "was" based in Gibraltar, a famous tax haven,

& involved in 'trusts' & keeping assets out of the hands of the tax man

& then Malta, another tax haven

had a run-in with regulators

is/was not such a big shock imo

----

Gibraltar lives from avoiding the taxman, which usually means avoiding the Spanish taxman

I think Spain claims that 20% of cigs smoked in Andalucia come from Gibraltar, tax free.
& then there is hard alcohol

(Gibraltar needs/wants its tax haven status in order to stay alive !! & not require never ending funding from the UK Govt to stay afloat; scenario repeated globally (Bermuda, Singapore, Bahamas (USA ?), Caymen Islands, its the way it is sadly, (personally I think all tax havens should be closed down, including Switzerland, but the rich & powerful hide their riches in these places so it looks unlikely to happen !!; but Govts could require prior Govt approval for any transfer to/from these places & close 'em down tomorrow but they don't, so Im sure they will go on for decades.)
---

Europe has been the spawn/home of tax havens for decades ....& its still the same...Monaco, Channel Islands, IoM, Andorra (Spain's own tax haven), Lichtenstein, Malta etc etc
(& with the UK & Holland leading the way for having created overseas tax havens)

although things have tightened up & changed a bit

X decades ago Brits had their bank deposit accounts in Gibraltar, all correct, & ads for it in the UK Sunday papers, that all stopped years ago.

---

STM Plc
registered office is in the IoM, a tax haven, we all knew that, no ?

----

interesting
that a SIPP is a form of tax avoidance (100% correct & legal of course)
as is an ISA
as is having a private pension
& AIM shares have tax benefits
as do new shares in VCTs

....all things light years ahead of most other countries, really; & to be applauded & all helping to provide jobs & help create/fund innovation (& since the UK can't compete with countries with lower wages we "need" to give tax incentives for innovation & stuff that is 'new')

that other European countries are too stupid to copy these excellent British iniatives & instead they concentrate on creating as many additional taxes as they can so that innovators are just stifled so that they don't bother or just go abroad. (Siemens, Marconi etc all came to London to get backing to develop different patents of theirs, & helped London be at the forefront for electric lighting/power, metro, telegraph, wireless telegraph.....all providing jobs & tax in the process).

[briangeeee] 10/9/2020 19:01

Good evening and welcome TC! I don't post here much, but look in from time to time, and remember you from DGC days.

STM has its quirks as you'll no doubt find. It's on a relatively low rating for reasons relating to:

a. An investor suspicion that it lives at the slightly more aggressive end of pension interpretation and tax planning.

b. It's still significantly associated with QROPS, which clearly is no more, and the administration fees available there are not sustainably replicable in the SIPP market.

c. The Aussie Superannuation scheme plan didn't play out.

d. Trafalgar issues with Angie B slinging mud, and more recently the Carey court case.

e. The Company's brush with the regulator, and Alan's encounter with the old bill in Gib.

That said, it is working hard to clean up its act, but that means added cost and has made organic growth more challenging without the wild west of QROPS IFA recruitment.

[smithie6] 10/9/2020 18:22

great day

+4p

:-)

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makes the divi look irrelevant !!

[the count] 10/9/2020 12:04

--->SMITHIE6

Thanks for your response.

Yes, even if the cash has to be held for regulatory purposes, it is still a company asset, the mosst liquid possible, albeit with restricted use presummably.

But I will have a detailed read of the RNS this weekend.

Anyway, either way, I do agree that this stock is stinking cheap.

Thanks again for your quick response.

Regards,

THE COUNT!

[smithie6] 10/9/2020 11:58

cash & STM

it is a basic for STM which you should already know, if you did any research. ;-)

The nett cash is close to the cap. value !
but most of that cash needs to be held for regulatory purposes, so it cant be used for acquisitions or handed out as a special divi.

but
it surely shows that STM is way undervalued if valued as a potential takeover target, by a bigger company.

&/or if valued for the earnings & the cash.

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subduing factor is that 'we' might need to wait to see the price really move up....to see that the hoped for increase in profits due to cost costing & acquisitions start being delivered. At this moment that is in the future, but imo not so far in the future (read the RNS :-) )

("...drive for improved margins, I am pleased to confirm that our key IT projects remain on track with regards to scheduled completion"
& 'increase in turnover should/will also increase the % profit margin' )

[the count] 10/9/2020 10:40

--->SMITHIE6

Well, I bought in today based solely on that tipster's write up.

And then I discovered this thread as well, so nice to know I am not alone.

But when you guys work on a PER ratio, wouldn't it be more indicative to subtract the cash position from their market cap, and then to base it on the remaining market cap net of cash, or do they have massive debts.

Haven't had time to research this further, so thought I would ask you guys on here, hoping one of you knows.

Regards,

THE COUNT!

[smithie6] 10/9/2020 08:14

where does that tipster get his turnover number for next year from ?!!!

£28.4M !!!!

up from Finncap's estimate of £24M for this year.

ie. +£4M

I'm an STM fan but if a tipster quotes some big jump in numbers such as turnover then imo he needs to say where it comes from.

is it from Finncap ?

----

the recent acquisition should produce about +£2M in turnover, taking it to £26M, if achieve £24M this year.

perhaps Finncap are already including the turnover for expected future acquisition, even though nothing is yet announced
----

nice to see the tipster making the same points as me.

---
the possibilities of shareholders making a good % gain over 12, 18, 24 months are definitely there, hopefully it will happen

[value hound] 09/9/2020 17:28

From Master Investor FWIW:

STM Group – Looking very cheap indeed
By Mark Watson-Mitchell 09 September 2020

£700m assets under management, £17m cash in the bank, £2.5m profits, 85% annual recurring revenue, 9 times earnings, 5% yield and only valued at £19.6m – looking very cheap indeed.

Yesterday’s interim results announcement by this financial services group looked disappointing, but that was just the ‘on the face of it’ view.

I spoke to the CEO and finance director of the £19.6m capitalised STM Group (LON:STM) and I repeat my opinion of the company set out in my late May profile – that the shares are massively undervalued.

The AIM-quoted company has operations in the UK, Gibraltar, Spain, Jersey and Malta. It employs some 260 people and has over 160,000 customers across 126 countries.

Its basic business is the delivery of specific financial service products to professional intermediaries, together with the administration of assets for its international clients with a view to help wealth structure for retirement, estate and succession planning.

The half-timers to end-June this year reported revenue down £0.1m at £11.8m and pre-tax profits of £1m (£1.1m). The fall back was due to a mix of Covid-19 impact and increased costs, together with heavy IT spend.

The staggering point that the market seems to have missed is that it has a magnificent annual recurring revenue running at 85% of the total. Just think of the stability that offers any finance director, or banker, in assessing ongoing commitments.



Although the group has a £5.5m acquisition facility with RBS, it is actually carrying a very healthy £17m cash at bank.

The group is actively seeking out fresh acquisitions but is mean on its purchase criteria. It is operating an ongoing ‘buy to build’ strategy and has been very successful in doing so.

It looks for other companies in its own marketplace operating with revenues of £2m to £3m for which it is prepared to pay 2x revenue. Larger companies elsewhere in the sector are paying 5x to 7x for books of larger revenues. The key factor, though, is the longevity of the pension books that STM acquires.

On the new business side, the company has seen a bit of a slowdown in the first half. There is a lot of enquiry and quoting given but decisions have been slowed down by the lack of person-to-person marketing because of the virus. But that will soon start to pick up again.

Two thirds of total revenues come from its pensions business, a sixth from life assurance, and similar between corporate trustee and other services. As a matter of interest, it has about £700m of assets under management.

The group has some 59.4m shares in issue. Large holders include Premier Miton (16.99%), Clifton Participations Inc and Alan Kentish (CEO) (11.31%), Septer Limited (10.85%), River and Mercantile Asset Management (5.64%), Kestrel Partners (3.69%), and Aeternitas Imperium Privatstiftung (3.59%).

The company’s broker, finnCap, is looking for a full-year turnout of £24.1m revenue and £2.5m pre-tax profits, worth 3.5p in earnings and double covering the 1.7p estimated years dividend per share. That is on 9 times earnings and a 5% yield.

So, with the 2020 financial year close to ending we look forward to predictions for the 2021 and subsequent year.

£28.4m in revenue next year could almost double pre-tax profits to £4.5m, giving 6.2p of earnings and treble covering a 1.8p dividend per share. That would put the shares out on 5.2 times prospective earnings.

Then the 2022 year might see £30.2m revenues and £5.9m of profits, with 8.2p of earnings and a four-times covered 2p dividend per share. Well, a 3.9 p/e – what more can I say?

If you haven’t already got the message, then surely those estimates will convince you that this group is on an excellent recovery track and that its shares are substantially undervalued. The shares closed last night at 32.5p after a dealing volume of some three and a half times the daily average.

My short-term target price seems easily attainable and could give an upside of over 50% from now.

[smithie6] 08/9/2020 09:19

:-(

reported profit numbers not so good (but underlying numbers are only down about 10%)....but recurring numbers are good imo

given time hopefully the costs will be reduced & profits will rise again, as the co. has forecast.

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underlying/'before' profit = £1.9M (excluding finance costs, amort, deprec. etc

if x2 for a full yr you get £3.8M

add 0.6M profit (only in the future once cost cutting implemented) for the recent acquisition

& you get £4.4M as the 'before' number

& if another acquisition is made, as expected
then phps 4.4M will hit 5M. (the after number will be lower of course, after deprectn, amort, tax etc)

& the co. sits on a big pile of cash

imo the cap. value of £19M is too low for these numbers; while yes, reporting an underlying fall in profits is not going to make the share price rise on reporting day.

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divi of ~3% while we wait for cost cutting to increase the profit numbers..

.& the cost cutting with the low p/e, EV & high recurring revenue will hopefully minimise the downside risk (although I thought the same at 34-35p, (well, not fallen far from there))

(& holders since about Jan. 1 2016 have received divis of about 7p, not bad)

[cheshire man] 08/9/2020 07:15

Looks like a steady ship to me value hound and more acquisitions on the way by the looks of it:-)

"The recent acquisition of the Berkeley Burke SSAS and GPP companies are a welcome addition to the UK business portfolio, and demonstrates our commitment to further building our UK operations and delivering on our growth potential. In addition, we continue to pursue acquisition opportunities where we are in active discussions. "

[value hound] 08/9/2020 07:08

Good results, excellent value still - and worth more like 50pps IMO.

Any thoughts?

[smithie6] 27/8/2020 08:54

ah...good Finncap info

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onwards & upwards !

[fillipe] 27/8/2020 08:37

Yes, indeed.

I reckon STM is coming along really quite nicely.

The bests on show at the bid/ask are 35.2p v 37p and particularly healthy, given the 18.56p low of 17-3-20.

Just a reminder that 13-8-20, finnCap reiterated their target of 53p, which I look forward to reaching.

f

[smithie6] 27/8/2020 08:07

nice 2p rise this morning

been an on-going trickle of buys in past days (& a £9k buy yesterday afternoon) & not enough sellers to balance that