Small Cap Value Report (Thur 28 Sep 2017) - CMCX, HVN, MOSB

Thursday, Sep 28 2017 by
68

Good morning!


CMC Markets (LON:CMCX)

  • Share price: 163.75p (+6%)
  • No. of shares: 288 million
  • Market cap: £472 million

Pre-close Trading Update

This stock is of particular interest to me because I follow the sector, and currently have a long position in IG Group (LON:IGG).

This sounds good:

Profitability in H1 2018 is significantly higher than the same period in 2017 with both net operating income and revenue per client higher (and marginally higher than H2 2017), driven by increased client volumes.

Interestingly, the statement says there has been a small decline in active clients and that therefore, the improved financial performance helps to prove that CMC is focusing on higher-value, experienced clients.

This would be essentially the same as the IG strategy for the past several years. IG has had no interest in increasing active clients in the UK, instead only wanting to find and keep the most profitable ones.

It was a sound strategy but then it became very relevant when the FSA last December threatened to put leverage caps on retail traders in leveraged products. Along with other regulations, these rules would have had a particular focus on restricting how these firms are allowed to cater to inexperienced clients.

The regulatory threat smashed the share prices of all the stocks in the sector, although they have been recovering since then. CMC is up more than 50% from the low of 95p.

The threat hasn't gone away, but the FSA is certainly taking its time to figure out what to do next. It received more than 2,500 submissions in relation to the proposals, and has doubtless been wading through them.

On this subject, CMC says:

Regulation remains a key focus for the firm, and despite profitability in H1 2018 being significantly higher than the same period in 2017, the firm remains cautious about the future outlook given the ongoing regulatory uncertainty and the impact, if any, potential changes could have on Group performance.

I'm happy continuing to hold IG, which has the best international diversification and which I think would experience a strong boost to its competitive position in the UK from the new rules. I'm not sure if CMC would experience any competitive boost.

But CMC shares remain pretty decent value, still on a discount to compensate for this issue:

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Disclaimer:  

All my own views. I am not regulated by the FSA. No advice.

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CMC Markets plc is a holding company. The Company is a provider of online and mobile trading servicing both retail and institutional clients. The Company enables clients to trade over 10,000 financial instruments, including indices, commodities, foreign exchange (FX) and equities through its trading platform. It operates through three segments: UK and Ireland (UK & IE), Europe, and Australia, New Zealand and Singapore (APAC) and Canada. Clients can trade the markets via contracts for difference (CFDs), financial spread bets (UK and Ireland segment only) and binaries. With the Company's spread bet, a client bets a specific stake size per point movement of a product, rather than trading a specific number of shares or units. The Company offers four types of binaries: Ladder, One Touch, Up/Down and Range. It also offers Australian wholesale and retail clients the ability to buy and sell Australian Securities Exchange (ASX) and SSX (formerly APX) listed products and managed funds. more »

LSE Price
87.1p
Change
4.4%
Mkt Cap (£m)
241.1
P/E (fwd)
10.2
Yield (fwd)
5.6

Harvey Nash Group plc is a United Kingdom-based recruitment business company. The principal activity of the Company is the provision of professional recruitment and offshore solutions. The Company's segments include United Kingdom & Ireland, Mainland Europe and Rest of World. Services provided by each segment are permanent recruitment, contracting and outsourcing. The Company provides executive search, interim management and leadership consulting services. Its leadership services include board evaluations, management development, audits, assessments and strategic human resource (HR) consulting. Its professional recruitment services include technology recruitment business and recruitment solution business. Its offshore services include projects and software services, which provides application development, third party software maintenance and outsourced software services to clients across the world, and managed services/business process outsourcing. more »

LSE Price
128.5p
Change
0.8%
Mkt Cap (£m)
n/a
P/E (fwd)
n/a
Yield (fwd)
n/a

Moss Bros Group PLC is engaged in retailing and hiring formal wear for men. The Company operates through Moss Bros branded mainstream stores. The Company's segments include Retail and Hire. The Company offers various types of suits, skirts, jackets, trousers, coats, casualwear, ties, shoes and accessories. The Company offers clothing and accessories for various occasions, including weddings, prom, race day suit, tuxedo and black tie, interview attire and graduation. The Company also trades through Savoy Taylors Guild fascia. It has approximately 100 Moss Bros and Savoy Taylors Guild branded stores and over 20 Moss Bros outlet stores, which trade Moss Bros own brands and selected third-party brands, including Hugo Boss, Canali, Ted Baker, DKNY and French Connection. The Company has approximately 120 Moss Bros Hire outlets, which are contained within Moss Bros Retail and Savoy Taylors Guild Stores. The Company's sub brands consist of Moss London, Moss 1851 and Moss Esq. more »

LSE Price
20.55p
Change
-1.0%
Mkt Cap (£m)
20.9
P/E (fwd)
n/a
Yield (fwd)
n/a



  Is LON:CMCX fundamentally strong or weak? Find out More »


40 Comments on this Article show/hide all

andrea34l 28th Sep '17 21 of 40

As an aside, when looking at "Holding's in Company" announcements I notice that Hargreave Hale crops up fairly often, and I recall fairly recently some negative comment being made in respect of them on here. Is there anything noteworthy in relation to them please? Also, have they recently changed their name to Canaccord Genuity Group?

| Link | Share | 2 replies
FREng 28th Sep '17 22 of 40
1

In reply to post #223553

Paul

I'd welcome your opinion on whether the Mobile Streams (LON:MOS) profit warning is a recoverable short-term problem or whether the likely losses make MOS uninvestable despite the cash they have (or had).

| Link | Share | 1 reply
Paul Scott 28th Sep '17 24 of 40
4

In reply to post #223573

Hi FREng,

As regards Mobile Streams (LON:MOS) - difficult to tell, but my feeling is that it's probably uninvestable now.

I've got too many shares to be able to sell, so looks like I'll probably go down with the ship :-(

Or, it might have a resurgence at some point? I've mentally written off my holding in this one, so anything above zero would be a pleasant surprise.

Regards, Paul.

| Link | Share | 1 reply
andrea34l 28th Sep '17 25 of 40

In reply to post #223578

Thanks FREng for explanation of HH name change :-)

| Link | Share
FREng 28th Sep '17 26 of 40
1

In reply to post #223583

Thanks, Paul. The market is certainly punishing bad news savagely at the moment.

| Link | Share | 1 reply
simoan 28th Sep '17 27 of 40
2

In reply to post #223598

Thanks, Paul. The market is certainly punishing bad news savagely at the moment.

What bad news? I must've read a different RNS. I thought the results were great and they guided upwards on revenue and may do so again before the full year! It's painful when a share gets hit after good news but it's much better than when it gets hit after bad news :-)! Anybody would think Boohoo.Com (LON:BOO) is one of the time-waste basket cases that get more airtime than they should round these parts!!

All the best, Si

| Link | Share | 1 reply
FREng 28th Sep '17 28 of 40
4

In reply to post #223623

Si - Paul and I were discussing Mobile Streams (LON:MOS) not BOO.

Regards

FREng

| Link | Share | 1 reply
ridavies 28th Sep '17 29 of 40

In reply to post #223568

Taken over by Cannaccord, I think.

| Link | Share
simoan 28th Sep '17 30 of 40
3

In reply to post #223638

Si - Paul and I were discussing Mobile Streams (LON:MOS) not BOO.

Sorry! My bad... have a thumbs up as apology! :-)

All the best, Si

| Link | Share
Graham Neary 28th Sep '17 31 of 40
3

In reply to post #223538

Thanks for the input Chris, Plus500 (LON:PLUS) is interesting alright but the cost of extraordinary profits and short-term growth is extraordinary customer churn. I do wonder if it will be around for the long-term.

Regards

Graham

| Link | Share | 1 reply
Graham Neary 28th Sep '17 32 of 40
2

In reply to post #223518

Hi, I'm very sorry but oil & gas is not a sector I analyse.

Regards

Graham

| Link | Share
Chrisfarrell21 28th Sep '17 33 of 40

In reply to post #223653

Hi Graham,

Thanks for that, I needed to hear something bearish. I checked the interim results where they talk about a conscious effort to improve the retention rates, and they say Q1 and Q2 had a low churn rate.

I will keep a close eye on that.

Ta

Chris

| Link | Share
Paul Scott 28th Sep '17 34 of 40
14

Hi,

The mix up above just again highlights the need for everyone to please put the company name or ticker into every comment.

All too often I have no idea what company people are discussing here. Please put the ticker in, to make life easier for everyone!!  :-)

Thanks, Paul.

| Link | Share
peterg 29th Sep '17 35 of 40
2

Excellent point, Paul. Perhaps we could also encourage people to quote key sections of posts they are responding to? It makes reading and understanding threads much easier.

| Link | Share | 1 reply
herbie47 29th Sep '17 36 of 40
1

In reply to post #223553

Yes Boohoo.Com (LON:BOO) has dropped back about 25%, I was tempted to buy some, but is that no different from IQE (LON:IQE) recent fall?

| Link | Share
simoan 29th Sep '17 37 of 40
2

In reply to post #223748

Excellent point, Paul. Perhaps we could also encourage people to quote key sections of posts they are responding to? It makes reading and understanding threads much easier.

Yes, I agree too and it's an old habit I learnt from early TMF days making sure you quote the section you are replying to. However, it also helps if you hit the reply button to the post your responding to  (which I notice you have not in replying to Paul :-)) because then you get a little comment that says "In reply to Paul Scott, post #24" or whatever and if you click on it you can see the whole thread and only that thread. I quite like this feature, so well done Stocko! 

To be fair, FrEng did this and it was really my oversight that caused the problem. My only excuse was a tough day at work (as opposed to downing cold beers whilst enjoying a panoramic vista of Dubrovnik harbour!) and I'd hit my third stage top out phase, mainly due to lack of caffeine... and we all know what happens after a 3rd stage top!

All the best, Si

| Link | Share
Gordon Tough 4th Oct '17 38 of 40

I am very new to analising shares like they are analysed on here,-this could probably be a contributory factor of why I have lost so much and have now put all of my eggs into one oil and gas driller/producer hoping to get some back. 4 years ago With 70/80k to invest I could have thought about the moss bros andcenkos/Harvey Nash type investments but instead went for the suicidal cfd advisory account route with 5 different brokerage companies where I lost money with all. Prime markets £6000 and JN FINANCIAL £13/14k both gone bust.Galvan changed name toGain Capital-why lost £1800 London Stone Securities lost about the same. I also lost money with a fifth non advisory broker. All prmised the earth. No significant backing fromombudsman or fscs-onus on me to prove not on them to defend their forecasts. So i am loking for guidance to learn new skills to get my money back.playing with £5k with £10k invested dependant on oil price hitting $60 a barrel ( don't hold yer breath) this from another broker changing name!

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Gordon Tough 4th Oct '17 39 of 40

I have registered the stock ratings of 2 companies as being rated as very high 92 and 98. I take it this would be a valuation of safety of the stock in rough waters,safety of any dividends,quality of management,investment outlook,and general future prospects to carry on making and improving profits.
Having seen this I was confused to see that BOOHOO.COM has fell from a high of 270p to195p. I am sure that the timing factor is very very important with these shares-as important as when 2 builders Persimmon and TW were advised me by a well known brokerage (same one who is changing name) when the price was above 1200p it fell like a stone to 900p and took 9months or so to get back to 1180p when i cancelled the account. TIMING-NOW DOUBLE.

| Link | Share
Gordon Tough 4th Oct '17 40 of 40

It was HVN AND MOSS BROS with stock ratings of 98 and 92, so comment on BOO is not so relevant,but the timing comment I made IS. Even with a very good stock investment timing is so important.Luck must still play a big part in profit or loss from shares. JNFINANCIAL had me on a cfd long position for around a year which eventually wiped me out--the stock was IQE and I sold in a margin call at 16p--now look at it. Thatt was 2013/14. Timing out 3 years.

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 Are LON:CMCX's fundamentals sound as an investment? Find out More »



About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »

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