LON:PLUS | Any Value In Plus500 - PLUS.L

14th Aug '14 by mrwhits

21 comments 16584 reads

Any value in plus500? an online trading platform provider?

the following forecast fundies suggest it might be worth a further look,

Broker Forecasts
Yr End Pre-tax EPS EPSg P/E PEG DPS Yld %

2014 85.52 56.46 98.08 8.71 0.09 33.87 6.89
2015 89.86 58.83 4.21 8.36 1.99 35.66 7.25

Directorspeak?

"Current Trading and Outlook

Plus500 has performed strongly in the first half of 2014 and the Board looks ahead with continued confidence. This solid performance further underpins the Board's commitment to pursuing a strong dividend policy and therefore the board is pleased to declare a dividend of $0.235 per share.

Whilst customer acquisition slowed in the second quarter, EBITDA margins have remained strong, underpinned by increased ARPU and ongoing improvements in the efficiency and effectiveness of the Company's online marketing efforts. Current Q3 trading has continued to be strong and the Group is therefore confident of meeting market expectations for the year ending 31 December 2014."

which sounds promising, and full of confidence, as well as the following,

"The Board has declared an interim dividend of $0.235 per share which will be paid on 19 September 2014 to shareholders on the register at close of business on 22 August 2014, with the shares marked ex-dividend on 20 August 2014. This represents a total pay-out of $27 million (H1 2013: $8 million), or 50% of net profit for the six months ended 30 June 2014, in line with the Group's stated policyto pay no less than 50% of retained profits in each financial year out as dividends."

so they are going to pay at least 50% of retained profits as divis, which, if profits take off could be significant.

it is going to pay out approx(as it's denoted in $) 13.97p/share on the 19th September, xdivi 20th August.

it has also been bashed recently due to a prominent figure saying he didn't like the company and he thought it was a house of cards, but recovered a little since then.

do I think it warrants a further look? indeed.

thoughts anyone?

Regards

mrwhits.

disclosure - long PLUS

edit - just found a numis quote from somewhere else about them,

"Numis BUY [PT 838p].PLUS500 is currently trading on a 2015E p/e of 8.0x [peers 16.4x] which we feel is currently unjustified given its sector leading ROE [2014E

97%],strong growth prospects [3yr EPS CAGR 34%] and favourable yield [2014E 6.6%]"

forget the price target, but that comparison to peers and ROE look tasty to say the least! - here's hoping.

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Ramridge

14th Aug '14

From your post it seems that you are not aware that Simon Cawkwell,a.k.a. Evil Knievil is behind shorting this share. So proceed with lots of care.

mrwhits

Hi Ramridge,

to the contrary, I mention it in the post, but didn't name him, and to be honest don't really take much notice of such things anyway as I don't follow others, I decide for my self etc.

If he thinks it's a house of cards then let him put it on paper the reasoning, which I am not aware he has done so.

Paul Scott sticks his nadgers on the line when he says something by backing it up with shown reasoning and numbers, I have never seen SC do that in public, maybe he does with his paid service, who knows.

I think it is cheap on forecast fundies, so decided to go long.

Thanks for the heads up though.

Regards

cig

They're playing a funny game with most of their stakeholders (customers, who get an overpriced product, affiliates, who get a misleading reward scheme, regulators, by being a bit loose with the rules; all of which you can infer from looking at their websites with an inquisitive eye) which may or may not be sustainable, and while so far they've been (very) nice to shareholders you may wonder why and whether it will last.

lightningtiger

15th Aug '14

The dividends are extremely good,with this interim now, @ around 14p per share ($0.235). The earlier dividend this year was $0.1504 paid on 5/4/14 and the previous one was $0.0630 paid on 3/10/13. Although the share price in the last couple of days has fallen to 459p it is still up about 250% from a year ago! Probably due to some shorting activity as mentioned. Buying some shares now at that price means about 3% (14p divided by 459p) comes back as a dividend.
Given the impressive results on 13/8/14, with new customer increased 33% to 32,673 and active customers increased 35% to 67,232, the 838p price by Numis seems easily possible in the future.
Cheers from Lightningtiger

johnrosier

First up I'm a holder of £PLUS Plus500 having bought for the JIC Portfolio on July 21st at 386p.

My view is that it still looks a good risk /reward and am happy to have a modest holding in it.

There seem to be lots of comments about how sustainable the growth is, which I think would be more pertinent if it was being valued as a high growth stock. Admittedly it had fewer active customers in Q2 than Q1 but nevertheless showed growth year-on-year. We need to see how H2 pans out before writing it off.
Its outlook statement was encouraging:

"Current Q3 trading has continued to be strong. We remain confident of meeting market expectations for the full year and are focused on generating continuing strong returns for our shareholders."

I think writing off all its customers just as "mug punters" is a bit much. On that basis you wouldn't invest in any spread betting company given the figures on the percentage of customers that actually make money or for that matter in any gambling company.

Paul wrote a piece yesterday from his Greek idyll in which his last point was "On the other hand, the positives are that the business seems to be remarkably cash generative, and the cash looks real because it's being paid out in dividends. If profits are sustainable, then the valuation looks attractively modest." That to me was the most important point and perhaps should have been given more weight.

It is unfortunate that there is a 30% withholding tax on Israeli dividends but even so the dividend return looks attractive.

At the end of the day I make my own decisions on stocks so to those who point out that the "Evil" one is shorting the stock I say look at the shareholder list; Odey is no mug and holds 13%.

Shares have had a pretty poor couple of days; hopefully they will find some support on a projected 2014 PE of 8.0x and a yield, even after 30% withholding tax, of 5.2%.

The problem with shares which are 'in play' with shorters is that their actions change the risk profile from perfectly investable stocks which tick all the boxes to gambling stocks. The price movement is dictated not by fundamentals or market conditions but by deliberate manipulation by a pack of prairie dogs which have selected a target and are out for the kill. So you can gamble on whether they will succeed or not and take a position. That's OK. But to me that is not investing.

WeeEck

Ramridge,
From my experience, the market does not care if you are long or short so long as there is movement they are quite happy to take anyone's money. I can't think of a company that has gone under as a result of shorting that would not have succumbed eventually anyway and if the fundamentals are solid, no amount of shorting will KEEP the price down. What catches most investors (gamblers) is trying to outguess the market and make a quick buck. If you are convinced that the fundamentals stack up, forget about spreadbetting and CFDs, just buy the shares and ignore the wild fluctuations caused by the short term traders. Don't let the market makers and bookies steal your money. Just my personal opinion, no advice intended. I hold Plus 500.

I agree WeeEck, buy on fundies, sell on fundies, forget what everyone else says and does, if someone like EK comes along and the fundies become more favourable then either top up, double up, or just plain hold on until the time has passed.

harder to do of course if you use a derivative based product and/or use stop losses....neither of which I do, I just buy plain old equities.......

regards

Bonitabeach

Below I reproduce some research put out by.Liberium. I take the assumptions at face value but the one I question seriously is that the market will award a PE of 14.6 to every potential outcome - illogical.

My own opinion is that 14.6x earnings is too ambitious from where we stand today and I list my take using variable PE ratios dependant upon outcomes:

Base Case: PE 10 - Share Price 479p - 4% Upside

Bull Case: PE 12 - Share Price 723p - 57% Upside

Bear Case: PE 9 - Share Price 366p - 20% Downside

Disclosure: Long PLUS500

Liberium
15 August 2017
460p
We have created an easy-to-use interactive model for Plus500 in which you can vary key assumptions on new customer growth, ARPU, churn or average user acquisition cost to generate a fair value share price. Our base case assumes 2014e revenue of $180m, implying a 2H14e run-rate of only $74m for the remainder of 2014, conservative given 1H14 revenue of $106m. Currently, Plus500 trades on 9.6x 2015 PE, a 32% discount to its peer group. We think it is relatively good value given its higher growth profile. BUY.

The base case - 700p TP implies 53% upside

- Our 2014e revenue forecast of $180m is conservative: Given 1H14 revenue of $106.2m, implies quarterly run-rate of only $37m for 3Q and 4Q14 vs. 2Q: $45m
- The lower 2H14 run-rate is mainly driven by conservative assumption that ARPU declines by 17% vs. 2Q.
Average QoQ active growth of 2.5% between 2H14e-2016e and churn rate of 35.0%
- Average AUAC of $902 for the rest of 2014e, rising to $1059 in 2015e and $1120 in 2016e.
- Implies fair value share price of 700p assuming 2015 PE of 14.6x

The bull case - upside of 91%

- We assume ARPU growth of 2% QoQ going forward (vs 1y average of 20%)
- Active customer growth of 4.5% per quarter (vs 1y average of 4%)
- This implies revenue of $207m in 2014e and $246m in 2015e, equivalent to a 2014e YoY growth rate of 79% and 19% per annum in 2015 and 2016.
- Average churn rate at 34.0% per quarter. (vs 1y average of 34%)
- Our 2014-16e forecasts assume average AUAC growth of 1% from 2Q14 level; implies 2015/16 average AUAC of $880 vs. 1y average of $680
- Implies fair value share price of 880p assuming 2015 PE of 14.6x

The bear case - upside of 29%

- We assume depressed ARPU average $900 in 2H14. Then 1Q15 ARPU will rebase to the average of 2014 at $1080 and grow at 1% per quarter onward (vs 1y average of 20%)
- Active customer growth of 0.5% per quarter. (vs 1y average of 4%)
- This implies revenue of $176m in 2014e and $173m in 2015e, equivalent to a growth rate of 53% and -2% respectively
- Average churn of 36.0% per quarter (vs 1y average of 34%)
- Average AUAC of $990 between 2H14-2016e (vs 1y average of $680)
- Implies fair value share price of 594p assuming 2015 PE of 14.6x

shanklin100

FWIW, the interim results for PLUS have now been added to Stockopedia and the various metrics updated. The main changes are that Value metric has gone from 54 --> 77 and the Stockrank from 92 --> 98.

Hi Shanklin,

for want of not sounding thick, as a free subscriber to stocko, what does that mean? is it that they think it is more value now, better value/worse?

Hi MrWhits

There are a number of Stockopedia webinars on Youtube

These ones may answer your question.

https://www.youtube.com/watch?v=qmUyKHKpQMs

https://www.youtube.com/watch?v=keHurC_WRK0

HTH. Cheers, Martin

If you can access this article, it may be quicker and easier to read it than watch the webinars...

... http://help.stockopedia.com/knowledgebase/articles/184381-how-do-you-calculate-the-stockopedia-stockranks-

ok thanks for that, it explained it for me.

regards

25th Feb '15

OK, so they announced results this morning, found here,

http://www.investegate.co.uk/plus500-ltd--plus-/rns/preliminary-results-2014/201502250701537808F/

which look good to me,

highlights are,

Financial Highlights

Highly cash generative, paying out $92m in dividends representing 90% of 2014 net profits

· Revenue increased 99% to $228.9 million (FY 2013: $115.1 million)
· EBITDA1 increased 116% to $145.4 million (FY 2013: $67.3 million)
· EBITDA margin increased to 63.6% (FY 2013: 58.5%)
· Net profit increased 102.6% to $102.5 million (FY 2013: $50.6 million)
· Earnings per share increased 89% to $0.89 (FY 2013: $0.47)
· ARPU increased 63% to $2,160 (FY 2013: $1,325)
· Operating cash flow of $118.9 million (FY 2013: $57.1 million)
· Final dividend per share of $0.3001 (total pay-out of $34.5 million) and a special dividend per share of $0.2657 (total pay-out of $30.5 million), for a total dividend pay-out of $65 million with ex-dividend date 19 March 2015
· Total dividend for 2014 of $92 million, representing a pay-out of 90% of net profit for the 12 months ended 31 December 2014
· Dividend policy increased to a 60% pay-out ratio with flexibility to pay special dividends as appropriate

with the outlook statement as follows,

"the Board believes that the Company's momentum will continue, resulting in sustained strong growth in 2015."

whats not to like?

regards

mrwhits.

disclose - long plus.l

brokers forecast for 2015 as of today, i.e. unrevised are as follows,

Broker Forecasts
Year Ending Pre-tax EPS EPSg P/E PEG DPS Yld %
2015 99.96 65.55 9.89 8.89 0.90 39.33 6.75

lest see if these will be altered upwards in the next few days/weeks, and look out for the figures for 2016 when they are published etc.

Regards

mrwhits.

disclose - long plus.l

found in the "other place"

Broker reactions today:
Liberum:
Record high 4Q14 revenues beat LIBe forecasts by 40% with EBITDA beating by 33%. Net income was adversely impacted by a 1-off balance sheet FX translation on USD appreciation. Active customers increased 16% QoQ to a record high driven by a 28% increase in new customers and subdued churn. The EBITDA margin moderated slightly to 57.2% due to higher acquisition costs as PLUS targeted higher value customers. The sponsorship of Atletico Madrid will likely drive lower acquisition costs over time. The 1Q15e outlook is upbeat. We upgrade our 2015e revenue & EPS forecasts by 17% and 10%; increasing our target price to 800p- based on a 2015x PE of 12.2x. BUY.

Numis:
Plus500 reported a record level of revenues and operating profit during 2014 as it benefited from a higher level of active accounts and strong growth in average revenues per user (ARPU). Revenues increased 99% to $229m, 8% ahead of our estimates, while EBIT increased 116% to $145m, 5% ahead of our estimates. We are upgrading our 2015E/2016E EPS estimates by 4%/3% reflecting the higher level of active accounts, a modest increase in forecast ARPU, partially offset by higher advertising expenses. The total dividend was increased from 29c to 80c (53.51c base + 26.57c special dividend), implying a total payout ratio of 90% (Numis: 60%) and a trailing yield of 8.8% (52p). The momentum from Q4 appears to have been maintained into 2015 with “particularly strong new customer additions”. Plus500 is currently trading on a 2015E PE of 8.6x (IG 16.5, online gambling average 20.8x) with a 2015E yield of 6.9% (IG 4.4%, online gambling 2.6%) which we believe is unjustified given its strong growth and high cash flow generation.

so liberum giving a chunky upgrade to numbers there, and numis citing strong growth, but only upping by 4% ish?

Lets see those cons figures in a couple of days.

regards

mrwhits.

disclosure - long plus.l

26th Feb '15

OK, so todays forecasts for the next ywo years now look like this,

Broker Forecasts
Year Ending Pre-tax EPS EPSg P/E PEG DPS Yld %
2015 103.29 67.31 17.71 8.92 0.50 40.77 6.80
2016 115.52 76.37 13.46 7.86 0.58 45.95 7.66

which I still think looks cheap on fundies.

onwards and upwards.

regards

mrwhits.

disclosure - long plus.l

Daniel Rudd

16th Mar '15

Please could someone advise as to how to reduce the amount of tax paid on dividends for UK based investors. Thanks

TheWatchmaker

Hi,
Details on dividend tax reduction were in the RNS from Plus500 on 02-March-2015
http://www.londonstockexchange.com/exchange/news/m...
Contact their agent via email and request that the send you the relevant claim form. You'll then need to complete this and get it signed off by your tax office and submitted within the stated timescale along with evidence of your holding in Plus500 at time of going ex-dividend.
A bit of messing around, whether it is worth the effort depends on how much you stand to save in tax.

Good luck

Any value in plus500 - PLUS.L

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Mrwhits

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