I thought I’d highlight this little gem in advance of its full year results to 31st December 2017 that are due any day now. Jarvis Securities (LON:JIM) provides stockbroking services on a white label basis to other stockbrokers and investment managers. Its last couple of results have been very strong and the share price ran up to over 600p but have now dropped back towards the 500 – 540p range and are again looking attractively priced.
Jarvis with a market cap of £57.5m has some very attractive metrics – a StockRank of 89 with particularly strong quality metrics; 79% Return on Capital; 71% Return on Equity; and 46% Operating Margin. The operating margin is widening as scale economies kick-in and any further client wins should add significantly to the bottom line profits.
Jarvis has been using some cash it's generating to buy back shares but cash is building up on the balance sheet - so there is a possibility of a special dividend at some point (as was the case in 2015). Currently yielding 4.19% Jarvis has committed to pay-out 2/3rds of profits as dividends and does so as quarterly dividends – a feature I find very appealing.
Indications are that the H2 results will be good. The Q1 dividend was announced recently on the 8th February and at 5p was a significant 17% increase on last year. This is a clear signal of continued positive trading following on from the strong H1 results. Also, Barclays Stockbrokers have had a nightmare with their systems upgrade and we know that Hargreaves Lansdown have done well picking up clients as a result– it is likely that Jarvis has also benefited.
One negative is that MIFID II will have been a distraction and will almost certainly raised costs in the second half. So this is the background and I'm looking forward to seeing how Jarvis have performed.
Declaration - Maddox is long Jarvis Securities (LON:JIM)
Hi Maddox
Results out, in fact: https://www.investegate.co.uk/...
22% increase in PBT and EPS, 34% increase in dividend. The narrative is, as usual, cautious and realistic:
With that in mind I am urging investors to be realistic about near term results. As highlighted above our cost base has increased, so revenues will need to increase at a higher rate to maintain the growth of the past. That is not to say it cannot be done, especially if interest rates increase.
I hold, happily.
timarr
