Stm Share Discussion Threads

[lammylover] 02/12/2019 09:24

Its going to take a week or so to find the bottom here, IMO. Simon Thompson will print a screaming "Sell" in this weeks IC and more scared PIs will follow like sheep. I'm considering buying more, will wait and see how the price / volume trends. Rich

[smithie6] 29/11/2019 12:08

btw
another possible buyer phps for STM is KWG

they have debt of £80M agreed to acquire finance cos.

going global
Uk/Europe, USA, Singapore

well, if they bought STM they would suddenly see their number of clients rocket, & also their distribution/presence in Europe eg. Gib, Malta, Jersey, IOM....

----

( I dont want STM to be bought
..my argument or point is that its potential value to a buyer underpins the share price around this level, reducing the risk to share buyers, all imo of course)

DYOR

[smithie6] 29/11/2019 11:57

however
ST was a fan of STM for yrs I think

& it went from 20p to 70p (over priced)

he saw the potential profit increase before it happened

(& he picked that Israeli tv software co. I think & that did well)

while, yes, he did not predict this profit warning....but unless you have inside info that type of thing is difficult to foresee I think

so, imo he gets some right & some wrong, probably like all tipsters/writers

[eastbourne1982] 29/11/2019 11:36

Simon Thompson =

Buy when the share price is overpriced at year highs / multi year highs

Sell when the share price has tanked and is at multi year lows

Do the opposite and you will generally be a lot better off.

[smithie6] 28/11/2019 16:10

RCTurner2

.some logic/reason there but also I think various items of bad news were already included in the June statement and in fact are not 'shock news' now (just ignored by the mkt till this new RNS)

imo the mkt has over reacted & that the cap. value is supported by the value to sell the co. & its recurring revenue.

& underlying PBT for '19 is stated as ~2.5M
so the cap. value of ~16M at 27p is too cheap imo

(while the cap. value of WEY is the same & its loss making !!)

time will tell.

---

(on the -ve side I get the feeling that the new Chairman has gone a bit nuts on pushing to employ more mngrs etc as if he was preparing to conquer the world & for STM to become Goldman Sachs number 2 ....maybe that might be reined in or even reversed a bit over time)

---

Warren Buffet likes to buy when everyone else is fearful.
can someone give 'im a ring ? :-) !!

[rcturner2] 28/11/2019 15:53

Smithie, in this type of situation I take the director's statements with a pinch of salt. One off costs have a nasty habit of becoming recurring costs. The company is clearly under pressure. Let's see what the next set of finals looks like and then following interim results. When holders start spamming the thread you know they are worried.

[smithie6] 28/11/2019 14:02

an old trading statement from June '19

"Notwithstanding the increase in member numbers, we expect Carey Corporate to remain loss making for 2019 at £0.6 million, but with an anticipated break-even from early 2020. In addition, short term one-off integration costs of £0.5 million for the SIPP business will be absorbed during 2019, but timings will mean that the full integration benefits, expected to amount to annualised cost savings of £0.7 million, will not be fully realised until 2020."

cost savings of 0.7M, just for Carey, are expected, in the future

====

"The above appointments and one off costs incurred in 2019 will add an additional £0.5 million of expenses in the short term, but it ...."

& there is 1/2M from Prof. Indemnity insur. cost increase.

& prof. costs related to Carey

so, various 'hits' but I think that perf. can be improved over time.

====

& various of the hits to profit were already known about (in June)....but phps the mkt didnt fully take notice

[smithie6] 28/11/2019 13:49

XPS (pensions)

turnover 56M
cap. value 263M

STM
turnover 23M
cap. value 16-17 M

if ratio of cap. value to turnover were the same then STM cap. value would be ~100M ! (or 168p/share)
ok, STM has hit some bumps in the road, but it phps support the theory that STM is underpriced.

[smithie6] 28/11/2019 13:20

RCTurner

what do you make the underlying H2 pbt perf. ?

I make it 2.5 (annual underlying. 2019) - 1.6 (H1 underlying pbt)
= 0.9M. underlying pbt.

not so good, & yes a big reduction from H1

but
there have been one off costs & costs involved in getting Carey master Pension product approved (from ~Feb. to Oct. !) due to acquiring Carey

& a lot of the planned cost savings due to acquiring Carey haven't happened "yet"....but I would have thought that that process will have started or be about to

----

cost reductions options
got sites all over Europe incl. a London office
so maybe there are options to reduce the number of offices

[smithie6] 28/11/2019 13:06

'underlying PBT 2.5M 2019'

"Whilst it is disappointing to start on a rebased 2020 PBT, I feel confident that we have the right tools in place and growth opportunities available to us to deliver enhanced underlying profitability"

if one believes that then the shares are surely a buy

but imo even if pbt stays at 2.5M then a cap. value of 16-17M looks too cheap to me

[smithie6] 28/11/2019 12:55

cos. that could phps buy STM (or try, but they wld have to offer a higher price)

include

XPS pensions

cap. value about 240 M

while STM is 16-17M today

so, XPS could surely afford it

---

imo the cap. value at 27p is supported by the value to an acquirer

[smithie6] 28/11/2019 12:45

RCTurner

RNS said underlying annual '19 PBT 2.5M

you are not willing to accept that the one offs in the RNS are in fact one offs ?

[smithie6] 28/11/2019 12:43

I think the recurring income is still arriving !

23M turnover in '19

last 6 yrs all profit making

I think that the H2 situation is a one off in part due to the acquisition in Feb. '19, as discussed in the RNS

the dirs. & mngrs are experts in the sector & run offices in diff. countries & various products
& the MD has been there for some yrs & has a big wadge invested

If anyone can fix these problems then these ppl can.
& reducing costs for servicing recurring income...doesnt look a difficult problem to me !
compared to say fixing Bilby in its competitive mkt
or doing stuff for making/storing nitrogen or cos. trying to invent new drugs

[rcturner2] 28/11/2019 12:20

So smithie you are basically ignoring the fact that PBT has basically dropped to nothing in H2?

[smithie6] 28/11/2019 11:37

"Directors buying shares and maintaining the dividend would be positive for SP"

indeed

(& if 'we' have to wait 1-2 yrs to see a profit recovery then a 7% divi is nice enough, & well covered. new PAT 2-2.2M & divi costs about 1M I think)


----
(or any acquisition. even if small. wld help the atmosphere)

[camerongd53] 28/11/2019 11:33

This update was very disappointing.
I had obught into this share at an average price of 40p - The company hit a bad banana skin i n Gibraltar and I thought that when they got that sorted out it would be plain sailing.
The business plan has been hard to implement especially business targets.

Lets hope they can sort everything out.

On a positive note. Rising PI costs will affect competitors and if there is economy of scale e.g. tripling the size of business, increases the PI cost by double or less then consolidation could be very profitable. Rising PI premiums could increase the number of potential companies for absorption and consolidation.
Will look at the next set of results closely to see if the business model looks viable.

Directors buying shares and maintaining the dividend would be positive for SP

[smithie6] 28/11/2019 11:24

diluted EPS history in last 4 yrs

3.8p
3.9p
6.4p
5.9p

Dividends
0.6p
0.6p
0.6p
1.5p
1.8p
2.0p

last 4 yrs of divis = 5.9p
=21% of current sp

while in the bank your money would produce about 0.

STM still has its clients and has a turnover of 23M for this year. That is a lot of clients, that has a value. & it holds a lot of cash needed for regulatory reasons.

I think the profit can return towards previous levels, over time, as the RNS says. & personally I think the cap. value is attractive as an acquisition

possible buyers ?

- AJ Bell
& then market the STM products to its 230.000 account holders
& move a lot of the work/admin. to AJ Bell's offices & increase profits that way
...'books' of clients producing income have value higher than the reported profit (as shown by acquisitions made by STM itself)

[smithie6] 28/11/2019 11:11

"think cost cutting is tough. Profit has to come from growth options paying out or abandoning projects (i.e. lower capex)."

I disagree
they get a regular fixed income from having a big book of clients & then ~25% +/- of the turnover comes from extra work for clients

the costs are basically staff
to
- do the admin. for signing on new clients
- to answer questions & do admin. for existing clients
- produce & send out statements to clients
- marketing & advertising
- HR for these staff
- office costs, lights, cleaning, council/business tax etc

etc etc

these costs can always be trimmed
& the RNS says they will increase the use of IT to reduce staff costs

(integrating the last acquisition has not gone as planned...delays etc...so the planned staff cost savings there havent happened yet....but in time Im sure they will, whenever there is sn acquisition some staff normally get laid off)

----

acquisitions
they have been looking at some
if 1 happened that might help the atmos. for the share

[rcturner2] 28/11/2019 10:58

Smithie, work out what the PBT is for H2, no use quoting the full year figure.

[actofwill] 28/11/2019 10:48

I think cost cutting is tough. Profit hast to come from growth options paying out or abandoning projects (i.e. lower capex).

Also they they can still consolidate the insurance subsidiaries post brexit clarity. This will will release £4m of capital through the profit line.

[actofwill] 28/11/2019 10:48

I think cost cutting is tough. Profit hast to come from growth options paying out or abandoning projects (i.e. lower capex).

Also they they can still consolidate the insurance subsidiaries post brexit clarity. This will will release £4m of capital through the profit line.

[smithie6] 28/11/2019 10:23

so underlying PBT of 2.5M (so, underlying PAT of 2-2.2M )

but cap value is 16.3M (a P/E or about 8) & over 2-3 yrs the PBT is set bounce back due to cost cutting & more use of IT

sp now ~28p
in last 2 yrs the EPS was ~6p !!
P/E of <5 if it can get back to that

-----

any suggestions for cost cutting ?

- close the London address ???
- more use of IT to reduce staff costs (already planned)
- synergies (staff reductions !) form last aquisition, not yet implemented due to delays

Im sure that costs will come down & profit will hence go up, not next week but over time
(& I note that the MD was previously the dir. responsable for IT, he knows the existing IT systems very well & he has been using IT to reduce staff costs for a number of years now at STM, he has the knowledge to do it)

[actofwill] 28/11/2019 10:16

Revenue can't fall off a cliff on this one - there is roughly £300m of guaranteed revenue coming in (no typo).

PNL can go to zero - but that's a management spending the "good" money on "growth options" and one-offs like professional indemnity insurance. Growth options might pay out or not. If not they might stop the bleeding after which pnl comes back.

I think it's odds on they will better themselves from here, not only because most of it seems delays. Delays are resolvable and require very little skill to do so: sitting on your hands.