LON:CMCX | Multibaggers With 10 Bagger Potential - CMC Markets (CMCX) Profit Warning In Quiet Market Conditions

20th Jan '21 by Bluesky Ventura

10 comments 1564 reads

CMC Markets - Profit warning in quiet market conditions

Up-date 2nd Sept 2021.

Cmc Markets (LON:CMCX) hit a new low at 74p in 2019. (lowest buy price 85p, additional buys at 125p, 175p , 363p, 461p ). ( I hold a long position)

Cmc Markets (LON:CMCX) issued a profit warning on quieter market conditions, income expectations now expected to fall from £330m to £250-280M. That is quite a reduction within 1 month of Q1's trading update. This takes all my forecasts down considerably. seel below

https://www.stockopedia.com/sh...

Sales Estimates FY21-25

Evaluation model suggests 400p valuation for 2021 end, (1000p upper end target for 2025). See the graph below)

For my own portfolio, I decided to take some profits and close down all my positions in my spread betting account. I still hold a longer-term holding in my ISA which I hold for the long term as a hedge for choppy markets.

BSV

CMC Markets - Sustained growth for longer

Up-date 25th March 2020

Cmc Markets (LON:CMCX) hit a new low at 74p in 2019. (lowest buy price 85p, additional buys at 125p, 175p , 363p, 461p ). ( I hold a long position)

Forecast and valuations upwards, as Q4 up-date reports in excess of end of expectations.
( Net operating income of £376.6 million, ranging from £370.2 million to £387.5 million. Profit Before Tax of £197.2 million, ranging from £191.3 million to £206.3 million).

The link provided to the news release.

https://www.stockopedia.com/sh...

Cmc Markets (LON:CMCX) say operation income in excess of £399M

Sales Estimates FY21-25

Evaluation model suggests 800p valuation for 2021, (1850p upper end target for 2025). See the graph below

up-date 8th OCT 2020

Cmc Markets (LON:CMCX) hit a new low at 74p in 2019. (lowest buy price 85p, additional buys at 125p, 175p , 363p ). ( I hold a long position)

Cmc Markets (LON:CMCX) has come out with half-year results today, and make excellent reading;

CFD net trading revenue of approximately GBP200 million (H1 2020: GBP85 million)
Group's stockbroking net revenue is expected to increase to approximately GBP26 million for H1 2021 (H1 2020: GBP14 million)
Following the strong performance in H1 2021, the Board…

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Rusty2

20th Jan '21

It is a good update however you failed to mention 2 key points: "client activity in the third quarter eased compared with earlier in the financial year, when market
volatility was the highest since the 2008 financial crisis due to the COVID-19 pandemic."

" In Q3 2021, the entire business has continued to perform very well, with high active client numbers resulting in strong client trading activity, although at lower levels than earlier in the financial year. In addition, client income retention remained well in excess of 80%, but below the levels reported for H1 2021, as guided."

Probably why the shares have not risen much today.

I'm surprised the Australian regulations will have such a large impact on profits.

Looking ahead, I can't see the growth, unless we have another volatile year like 2020.

Bluesky Ventura

Hi Herbie,

Yes, Q3 numbers are less than the first half which was exceptional with covid. The model reflects this as the second half revenue assumption is £156M compared to £230M for the first half, I've sugged a -£20M revenue hit for Aus in 2022, hence the revenue decline.

The growth comes from geography and client expansion.

I think this is a conservative evaluation and expect the actual 2021/2022 to be significantly higher than suggested by analysts forecast.

As always, DYOR

Is there any reason why these companies are not in the USA?

You maybe right about the forecasts, I still have a holding in CMC Markets (LON:CMCX) and IG Group (LON:IGG), but have taken some profits.

There is USA Competition.

Surrey Steve

Hi Bluesky

Many thanks for your thoughts on Cmc Markets (LON:CMCX) which I also hold along with £IGG.

I was initially thrown by the date on the top of your update being 20^th Jan 2020 – have you updated your model by the announcement today 20/1/21?

As you can tell I am keen on the sector and wonder how much further it has to run. The elevated volatility levels in markets caused by covid have provided a trading boost to the CFD companies but it is difficult to see how much of this is going to stick.

My personal feeling is that there will be a drop in client activity but this will be less than that discounted by the market and probably less than that guided by management. I also expect to see some multiple expansion from the current level PE (ttm) 7.33 / PE (f) 14.8 but probably not to the 24x level in your model.

21st Jan '21

Well if Ig Group (LON:IGG) is anything to go by during the last recession (see numbers below);

Then growth is set to continue mainly due to new clients aquired. For Ig Group (LON:IGG) and Cmc Markets (LON:CMCX), its new client growth is 55% and 42% respectively. So I would expect growth to continue for some time according to my model.

DYOR

Well I see IG Group (LON:IGG) have just bought TastyTrade in the US, so they will have a presence there.

Looks interesting for the market access, but they paying about 20 times PBT, although they say it's earning accretive in the first year, They will strip out a lot of costs or grow considerably to achieve that. Let hope it goes well and the USA should be a big opportunity.

25th Mar '21

Cmc Markets (LON:CMCX) forecast up-dated with today's news.

2nd Sep '21

Cmc Markets (LON:CMCX) Forecast up-dated with today's profit warning. (see above text)

For me personally, it is a day to take some profits. I still hold for the long term as a hedge for choppy markets.

Multibaggers with 10 Bagger Potential - CMC Markets (CMCX) Profit warning in quiet market conditions

CMC Markets - Profit warning in quiet market conditions

Up-date 2nd Sept 2021.

CMC Markets - Sustained growth for longer

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Bluesky Ventura

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