Cenkos Securities - Views and Opinions

Tuesday, Nov 04 2014 by

Hi All,

My research has led me to broker Cenkos Securities (LON:CNKS) - The Stockopedia computers seem to love this share and it ranks as:

94 for Value
99 for Quality
98 for Momentum
and has an overall StockRank of 100! (and also passes 5 screens)

Operating margins have been increasing rapidly and return on capital and equity are very high.

It offers a dividend yield of around 6.5% covered over 2 1/2 times for this year. It has a load of net cash on the balance sheet. I can't really find too many negatives - I'm not a holder but am concerned that after such a rise from 2012, when the price was roughly 50p to today when the price is 213p that there may be little more upside, if the IPO market slows. Does anyone else have Cenkos Securities (LON:CNKS) on their watchlist or perhaps are holding and would like to comment - bullish and bearish views welcome!

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Cenkos Securities plc (Cenkos) is a United Kingdom-based independent institutional securities company. The Company's principal activity is institutional stockbroking. Cenkos provides corporate finance, corporate broking, research and execution securities services to small and mid-cap growth companies, and other companies, across a range of industry sectors, as well as investment funds. The Company offers its clients access to equity finance at various stages of their development. The Company's activities also include institutional equities and market making. It provides technical advice on all forms of corporate transactions, including initial public offerings (IPOs), fundraisings, mergers and acquisitions, disposals, restructurings and tender offers. The Company's subsidiaries include Cenkos Nominee UK Limited, Cenkos Securities (Trustees) Limited and Cenkos Securities Asia Pte Limited. more »

LSE Price
Mkt Cap (£m)
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29 Posts on this Thread show/hide all

JohnRMurdoch 4th Nov '14 1 of 29

I own them. Recently posted great results, price went up immediately, then dropped a lot without obvious reason. Not sure what is going on here. The stats and yield are great and I don't see any significant problems. Thinking about buying more but they are quite volatile and have high spread. There is not a lot of information about this company but no obvious negatives. Also would like more advice about this one.

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bsharman 5th Nov '14 2 of 29

In reply to post #87468

Hi, I like what I see but am unwilling to buy because there is limited coverage and information. Perhaps someone else knows more than us and can comment!

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TheMarinersWife 5th Nov '14 3 of 29

Heres my take on Cenkos.

They are a securities house. I get the impression that they are fairly heavily reliant on AIM issues, although they clearly have bigger clients as they were involved in getting the AA to market.

The IMS earlier this year where the earnings were significantly ahead of previous expectations seems almost entirely driven by the income from the AA work.

They reward their staff fairly generously for their success and also seem to distribute a decent chunk of their profits to shareholders.

The business they are in means that they will do well when the market is buoyant, but see leaner times in a downturn. From my recollection their shareprice dipped further and faster that many others in the recent downturn. The news that the floats of other much larger and more established businesses (Virgin Money, Aldermore, Miller Homes) hit the sector, and naturally the Cenkos shareprice. Cenkos shares have since recovered most of the falls.

I get the feeling that there is not much volume so the shares seem to respond upwards as one tries to buy a position. So I suggest buying with care so as not to chase the price up.

Following this link http://www.investing.com/analysis/cenkos-securities:-upside-gearing-in-favourable-market-conditions-228906 lead me to this (paid for) article http://c3352932.r32.cf0.rackcdn.com/content/pdf81700a2edbd919e1459194b05269dd5d.pdf

If I recall correctly they pay their divi tomorrow so there may be a rise if there are people reinvesting the div back into the business.

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lightningtiger 5th Nov '14 4 of 29

Cenkos has just entered my watch list which captures any share that has at least doubled in a year. There are 51 in number today. The dividend looks well covered at 2.5 times @ 6.5%, which is very good, but how about next year? It is currently undervalued which is also good.
Although Stockopedia comes out with stock ranking of 100, Cenkos has not come out the best performer over the year from the investment banking sector.
Regarding the comment from TheMarinersWife above "They see leaner times in a downturn" Plus500 profits in a fluctuating market, which is also in the investment banking sector and has produced 166% growth since a year ago.Cenkos shows 110% which is excellent. It is also more undervalued than Cenkos, and operates in 51 countries as against just the UK.

So although Cenkos comes out with a ranking of 100 right now and shows Cenkos as a superb company, which it must be to get that ranking, Plus 500 is still in the top 10 growth stocks & personally I feel they have a huge potential for further expansion in their business sharing 50% of their profits as dividends.
From another software package which I have got Cenkos is not currently showing a buy right now but Plus 500 does. This may change tomorrow.
Cheers Lightningtiger

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TheMarinersWife 5th Nov '14 5 of 29

Interesting views. I see more parallels between Plus500 and William Hills, but maybe thats just my prejudices coming through.

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Ramridge 6th Nov '14 6 of 29

Hi bsharman -
I have been sitting on the fence on this one and thanks for prompting me to do further analysis.
- Cenkos is a niche player in the securities market, concentrating on growth companies and investment firms. So the recent AA deal is unusual and is skewing their performance significantly.
- AA provided £31m in revenues out of a total of £65m in 1H2014. That's near 50%
- AA was a one-off and to rely on further AA like deals is not prudent.
- Cenkos's recent impressive performance is purely due to the AA deal. The forecast PE drops to 5.8, and if you adjust it for the £44m cash, it further drops to 3.9. All down to the AA 'bonanza' revenue.
- The key question then is: without the AA,, i.e. in a business-as-usual way is this company investable? Edison reckons yes. They say the co. can flex its operations and reduce/ increase operational costs to reflect business changes.

My conclusion : I am not convinced. From an earnings quality perspective, the co. is driven by market sentiment and I can't see stable recurring revenue. The recent volatility in share price only reinforces my impression

Anyway, that's my take. I shall sit this one out. DYOR

Regards, Ramridge


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Edward Croft 6th Nov '14 7 of 29

In reply to post #87516

I think it's a misconception to say "Cenkos comes out with a ranking of 100 right now and shows Cenkos as a superb company, which it must be to get that ranking". 

A high ranking doesn't mean a great company. It just means that the stock ranks highly for value, momentum and quality scores - it lies in a basket of stocks which might (given historical tendencies) outperform.  

But it also might be a dud... the StockRanks are about probabilities - not certainties... there are 100 ranked stocks that fall loads, and 100 ranked stocks that do well... the success of the ranks (or not) is about whether the average performance of a set of high ranked stocks is good or not.  The individual stock is irrelevant.  

I keep getting grief about Wincanton ranking highly because everyone thinks it's bankrupt... that's again not the point of the Ranks.... !

Do not buy 1 stock because it's high ranked... it's better to buy a basket of 25.

Hope that makes sense.

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Ramridge 6th Nov '14 8 of 29

Hi Ed -
I appreciate that we are in the world of probabilities and not certainties. With respect to Wincanton, the bottom line appears to be:
- Stockopedia: There is a high probability that WIN will do well.
- Paul S : There is a high probability that WIN will tank.

And something in me says this cannot be right.

Regards, Ram

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PhilH 6th Nov '14 9 of 29

My take on what Paul is saying about Win is ...

If there is abump in the road in the execution of their business plan then there is little scope for manoeuvre.

And for me the stockrank says there is a strong chance that this stock might perform well.

Therefore for me it's entirely possible that both statements are true. That said I wont be buying due to poor altman score as I'm not clever enough to intepret the accounts or actually I cant be bothered to when I have other means to screen weak companies.

It's the old saying "You don't keep a dog and bark yourself"

Best of luck

Professional Services: Sunflower Counselling
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