Stm Share Discussion Threads

[smithie6] 27/5/2021 15:29

interesting

although I think that STM will make acquisition(s) in 2021, as the MD stated in the recent presentation.

& imo the sale of 2 companies was to produce cash to help fund acquisition(s)

Release of regulatory cash if STM is bought. Not 100% true. All depends on the acquisition price, & it would be the acquisition cash that shareholders would receive, not the regulatory cash; but yes any acquisition price would, of course, very much take in to account the cash obtained.
The acquirer would probably want some of that regulatory cash, to at least cover the regulations on the acquisition day, but one assumes that the amount of reqd regulatory cash would then reduce over time as the acquirer reduced the total staff & operating costs.

(for some assets the amount of regulatory cash reqd. is related to the value of the assets held, so no cash would be released for that part of an acquisition of STM, imo)

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whatever happens I think that all the dirs & ex-dirs & related parties (who own a fair % of STM) would want the share price of STM to be higher if it were to be acquired by someone.
The MD has just seen 3 IT projects go live, so I'm sure he will want those to produce some results/savings rather than throw in the towel one week later. & with better IT & with auto enrollment the co. has much better capabilities now to grow, 'if' it can generate the new client applications or via acquisitions.

[camerongd53] 27/5/2021 10:56

There has been much talk of STM being a consolidator in the fragmented SIPP market. If STM pursue this, I am happy if it is for the benefit of the share price as STM has been strategically restructured to achieve this
With the streamlining of the group and disposal of non-core activities. I ask is STM being set up to be consolidated rather than as a consolidator.
The FD Therese Neish is leaving and has a shareholding of approx. 500k. Selling out for up to 100p per share would be very convenient for her finances!! I am sure the other shareholders would accept such an offer. Such an offer would release the statutory capital balances to current shareholders. The cash balances cannot be distributed as dividends for operational reasons.

Just wondering
I think the conolidation process which ever way it goes is unfortunately on hold until the historical Carey issue is finally resolved.

[smithie6] 24/5/2021 16:25

ok, so a buy trade of 50k shares at 37.5p went thru as a delayed reported trade

[smithie6] 24/5/2021 14:28

interesting share price movement

looks like the trades are virtually all sell trades but the price to sell is up 2p !, inferring imo that there is a buy trade(s) being filled that we don't know about yet, or some buy trades have gone thru on another market which are not shown on the advfn info for trades

:-)

[smithie6] 24/5/2021 10:36

baner
did you work for Volvo in the past ?!

[smithie6] 24/5/2021 10:32

yes.

(for advice on reducing regulatory capital you would think that the ppl to approach would be....STM !
& they have been calculating it for years for every subsidiary & hence have to know the reg. cap. regulations in each country of operation in minute detail !)

[lundun42] 24/5/2021 10:16

I was also surprised to learn that external consultants are being used to advise on reducing the regulatory capital, particularly if they're referring to their insurance subsidiaries. If you look at the boards of the two life companies, amongst the very experienced NEDs there are at least 3 actuaries and a chartered accountant whose primary experience seems to be as a financial services restructuring expert, so surely amongst that lot they could figure out how to do it, plus you have the executives experience to draw on. It is more understandable to use external advice for something like specialist tax advice.

[baner] 24/5/2021 10:10

many thanks Smithie - this is a really interesting situation offering a very sound risk/reward!

[smithie6] 24/5/2021 10:08

yes, as an acquisition it would be very cheap

since after integration in a bigger co. a good part of the regulatory capital could be released (= returned). (if a buyer paid X million, they might be able take out/back X/2 once it is integrated in the bigger company. so the nett cost to the buyer might be X/2, making the yield-return double qrt the initial price of X million)

[baner] 24/5/2021 09:30

if you look at the multiple to sales they have received for the sold entities - in addition to the NAV - these shares should be worth not less than 70p on a break up/bid-basis. i guess there should already be some sharks circling this little but tempting fish.............

[smithie6] 23/5/2021 09:58

btw

Finncap analyst (11th May '21) has pencilled in 4.7p adj. EPS for 2022.
a notable jump from 2021. (3.5p)

(if achieved 4.7p it would make the current 34-35p share price quite/too cheap)

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imo this analysis can not include the expected acquisitions in 2021, since it is not 100% g'teed & of course there are no financial numbers which could be used.
so, I would expect this EPS estimate to increase if a beneficial acquisition is made, but phps in 2021 there would be little EPS benefit due to the time needed to do integration & reduce costs

'if' adj. eps does hit 4.7p in 2022 (announced in ~May 2023) what is a likely share price ?
47p, p/e of 10 ? (increased p/e due to growth in eps) could it achieve it in May 2022, since shares move in advance.
35p to 47p would be a rise of 12p, ~1/3rd over 1 year.
(if there is an acquisition in 2021 then I assume that the 4.7p gets increased & also the likely share price)

[smithie6] 21/5/2021 13:56

oooh, the graph for this thread shows a price rise of 2p !!

:-))

[smithie6] 20/5/2021 16:07

elsa

yes Alan comes over well.
as I expected,
he was the Tech/IT director before
& you need to fairly capable to get that role imo.
& I liked him being picked as the MD ;-)

I've been waiting a few yrs to see these IT projects get made & then introduced, as you'll see in my posts from yrs ago

I'm a tech. person, so he had my vote since he got the MD job X years ago (5-7yrs ??) (& increasing IT to reduce costs/labour is popular with all investors !) (& the MD said there is also a notable annual saving due to avoiding licensing costs for external software)

how much it will add to the EPS we have to wait to see, (but the underlying hidden increase in the value of the co. , with more use of IT, & a more modern efficient company has already happened :-) )

[jimtech] 20/5/2021 15:57

I bought more after listening to the Directors Talk presentation:

[smithie6] 20/5/2021 15:32

I liked the presentation.

btw it has been recorded, & the slides & the Q&A at the end, so anyone still doing a 9 to 5 can listen to it this evening.

it will be interesting to see if any increase to expected profit for 2021 is made in any broker analysis (which I think means just Finncap) & the answer to that is probably no.

although it was confirmed, as expected, that Carey is now moving in to profit as expected & the savings from using more in-house software are starting to happen, also as expected, so these things should already be in any analyst's prediction.

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I was interested to hear that one of the software developments produces a saving by not paying license fees for the industry std. software. (I hadn't realised that).

The MD said that 2 software developments are now in use & the 3rd one (the final main sw project I think) is going live this month or at the start of next month. That's good.

I was surprised that the co. is using external consultants to advise on how to reduce the regulatory capital. I thought the co. had been operating for years & hence knew the reqts inside out, so I'm surprised they need to pay for someone outside the co. to help them !
(they are looking at phps putting 2 'life' cos. in Gib. together. I think someone posted about that in recent days)

Also surprised that the MD spends >= 50% of his time in Gibraltar. imo all the acquisitions & integration & cost reduction work & relocation to Milton Keynes is in the UK !!
& surely he should be directing all of that.

(& I assume software development, the MDs specialist area, he was previously the tech./IT dir. of STM) & not in Gibraltar. & the job of the new FD is advertised as UK based. (so time spent in Gib., is it just because that is where the MD has lived for 20-25 years & his friends & family & life is there, rather than it phps being what STM really needs ?)

is the UK part wandering without leadership ? (phps under the leadership of the seller of the Carey business ??)

the MD & FD came over well. both seemed to be educated intelligent capable people, as you would expect/hope

(but which is not fulfilled at many listed companies !; at STX for example the MD doesn't present well (& the same was true for the previous MD of Bluestar, who appeared a bit bored & tired in financial studio interviews !, ok he was !, je je)

the MD chatted a little about co. valuation in the Q&A, & feels that the share price is undervalued, especially based on the EV (after subtracting the nett cash from the cap. value) & in X years time he expects/hopes it will be higher

future divi security was discussed & the MD said that some insti shareholders are income funds, that would not be happy if the divi was cut to put the money in to acquisitions, so, unlucky to be cut except for any shocks

......a lot more was discussed/presented but I don't think there was much that a close follower of STM didn't already know.

[elsa7878] 20/5/2021 15:05

Don't know how anyone that listened to that presentation could fail to be anything but impressed.
As I have said Alan is a very approachable and came across well, with a clear roadmap for the future.
2/3 year hold and ignore the short term noise.

[smithie6] 20/5/2021 13:47

I can do that.

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any requests for questions just post & I will try to send in, if I think any question is a good one

[lundun42] 20/5/2021 13:25

Hopefully someone on here is logging on to the update and can share some feedback on here later. I can't sign up for it as I've got to go back to work in 5 mins :(

[smithie6] 20/5/2021 12:37

3pm kick off ?

[smithie6] 20/5/2021 09:31

"IIRC STM said a year or two ago that they were planning to move the STM Life company to Malta but that has not happened"

good info digging

!!

seems surprising but I guess there must have been decent reasons for not doing it.

lots of changes going on this year & in recent years. Those of us still holding believe that the bod & managers have a lot of experience & numerous different subsidiaries & in different countries (with different rules) & that a suitable way forward will be found/achieved.

(& the directors & ex dirs have a lot of skin in the game so they will be doing their best imo).

[lundun42] 19/5/2021 22:43

Smithie6 - It says in the report "No new or incremental business can be accepted from the EU from 1 January 2021 until any new permissions are granted or equivalence is agreed. STM Life will continue administering its inforce EU policies to their natural conclusion (e.g. surrender, transfer out or policy maturity)."
IIRC STM said a year or two ago that they were planning to move the STM Life company to Malta but that has not happened and they now seem to be intending to merge their two life companies in Gibraltar. I took the note to mean that they can't do new EU life assurance business so I can't see how anything can continue to come from Malta for the life company. Yes they have their large pensions business in Malta which should carry on unaffected by Brexit but surely the Gibraltar based insurance companies can't now take life business from Malta (or anywhere else in the EU)as they no longer have permissions to do so since Brexit happened. Also by mentioning "incremental business" the report seems to make clear that existing EU customers aren't allowed put more money into their policies either. Not good unless the equivalence thing soon gets sorted I suppose.

[smithie6] 19/5/2021 22:42

is the trusts section not all now sold with the 2 sales in 2021 ?

(since viewed as non-growth)

[elsa7878] 19/5/2021 21:43

I thuoght they had sold off their insurance business some time ago. Do you mean assurance?
The business is basically pensions (14m) life assurance (5m) and trusts (4m)...roughly.

[smithie6] 19/5/2021 21:37

interesting
& thanks for sharing

1) "no new EU business can be accepted"

from Malta are they not free to operate within all of Europe ??

2) loss of turnover & profit from the 2 cos. sold

I was aware of that, easy to see, & I have assumed that the dirs would not have done it unless they (with the agreement of the indep. dirs on the bod) felt that the overall result would not be beneficial
so, I'm assuming that a compensating acquisition(s) will result. While noting that some money is not received until X months in the future (a purchase could make stage payments at the same time).

A reasonable % divi is being paid out, so clearly the dirs don't feel that they need that cash to fund acquisitions.

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tomorrow the "prospects" part should/will inform us about this.

[lundun42] 19/5/2021 12:59

I don't know if anyone read the solvency reports published last month by the two STM insurance companies. They do add some useful info which wasn't mentioned in the results announcement this week. It looks like STM is moving ahead with merging their two life insurance companies (maybe so capital can be released?) and also creating a service company to administer the policies (reduces future expenses risks). They mention that Brexit has had a material impact on the business since loss of passporting rights in January this year no new EU business can be accepted until (if ever?) equivalence for UK firms is agreed. This is a big blow as it looks from the report that at least 75% of 2020's £30m total premiums came from EU countries. These reports can be found on the insurance companies websites for anyone interested.

It will be good to hear more from the directors on future plans/outlook as whilst the recent disposals create a more pensions focused business, where is the growth going to come from to replace/exceed the lost income and profits of those subsidiaries just sold, the lost new EU business in the life insurance part and, if I read it correctly, no more growth in the large Malta pensions business implies a business running off as the ageing customer base retires/passes away? It would be nice to think that STM can achieve good growth from their focus on UK activities but they don't appear to have any critical mass in the SIPP market at least. Maybe the workplace pensions will take off big time for them or maybe some significant acquisitions will soon be announced to get the market more interested. Here's hoping!