Plus500 : Still undervalued ????

31st Oct '17 by Edward John Canham

5 comments 4883 reads

Good Q3 trading update from Plus500 issued today. Revenue up 50% on Q3 2016 and 23% YTD. Profit up 103% at $143.2M compared to the same period last year.

Bit of basic maths, and taking into account the positive momentum noted by the CEO, suggests revenue somewhat north of $400M for the year leaving the brokers estimates for 2017 and 2018 way behind and suggests a forward PER of potentially less than 6 for 2017. You are also looking at dividend yields of 6%.

Israel and Regulation are the main risks, but being computer based I expect they have a detailed disaster recovery plan in place and they seem to be addressing regulation.

Too good to be true? I'd welcome any thoughts.

Phil

(I obviously hold shares in Plus500)

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Edward John Canham

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5 comments

lightningtiger

31st Oct '17

Hi Phil, yes is the answer to your question. According to the figures of VectorVest the valuation is showing @ 1321p as of yesterday. so I am expecting it to be up a bit again today.
The dividend yields are paid from 60% of the companies profits and will depend when you bought the shares in the first place.
Regulators are in place in all countries now and this should stop any further hiccups.removing risks.

David Cheong

31st Oct '17

i sold out at about 900p,as i was worried of regulation. oh how i have missed the party

AnonymousUser252054

31st Oct '17

I agree. Looking at the fundamentals Plus500 are absurdly under-valued. But there is no getting away from the fact that being an Israeli business will mean a good third off any reasonable pricing - and if that was ever going to change I think it would have done so by now. They've been super-generous with their divs over the years which reassures me that real profits are being made but, let's face it, it will never be enough.

As for ESMA and the FCA, how far will they go? As you probably know, Plus did warn earlier in the summer that the outcome for this year would be significantly affected by imposition of regs, to me that sounded like they are expecting something quite impactful on the business, when it finally happens, despite also saying they will cope just fine. Therefore, although being a huge fan of the company, I don't think I'll be holding much longer as I expect the market will give CFD firms a kicking (again) when the announcement is made (possibly in early 2018), despite most and especially Plus, being cheap already. Having said that, there's obvious upside if it's regs-lite, after all.

Edward John Canham

31st Oct '17

Shine66

Your comments mirror my feelings about the way the market is treating this share.

The comments I would make are:-

Israel - this business is essentially in cyberspace, it's office just happens to be physically based there. Its not as if it has a production facility on the West Bank. I don't think it would take much to move the operation if the situation deteriorates and I'd be staggered if a tested plan was not already in place. I think the level of discount you're talking about is harsh. Whether the market will ever take this view ......???? But I'd like to think they would.

Regulation - this is an uncertainty. My view is that the regulators start heavy but after consultation end up at lite. I also think Brexit may move it to the lite end of the spectrum as well - or at least delay it.

Phil

lightningtiger

2nd Nov '17

There is no reward without some risk, and personally as long as they follow the rules they should be OK.. There is always the chance that more rules may be added at a later date to contend with.

Further news to the forward dividend payment VectorVest has got a figure of £1.00 a share, which with the share price now @ just over £10.00 seems about right coming about 10%.
Fortunately I bought my first 1000 shares a few years ago @ under £3.00 mark so the payout will be a lot more than 10%
So by re investing some of the dividends back in it should compound the total return. That's the plan.

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Plus500 : Still undervalued ????

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Edward John Canham

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