Good morning!

I didn't get around to covering requests yesterday but have now taken a look at Cenkos Securities (LON:CNKS), which did receive many requests. I'm posting my review of that stock first of all.  And then it will be time for Wednesday's updates.

Cheers,

Graham




Cenkos Securities (LON:CNKS)

  • Share price: 115.5p (+12%)
  • No. of shares: 56.7 million
  • Market cap: £65 million

Half-year Report

This is a stockbroker in the small and mid-cap space which provides corporate finance, market-making, research, etc. It acts as Nomad to AIM stocks, where it's one of the most active fundraisers.

I traded in and out of these shares back in 2015. It's one of those companies with lumpy revenues from occasional large, one-off transactions which are difficult to predict until they materialise. It is furthermore exposed to cyclical movements in equity fundraising activity, which are completely beyond its control.

Its stock market listing is very useful for it, however, since shares are a heavy part of overall staff compensation. So it can conveniently buy shares in the open market for its employees, who then also have a convenient place in which to sell them, should they choose to do so.

The company's staff compensation model is one of the best in the industry: base salaries are relatively low, but they come with high variable compensation. This results in motivated staff and a track record of never generating a loss in its entire history, all the way back to 2005.

Anyway, on to Tuesday's results. The cyclicality is evident:

59cb3902b1469CNKS_20170926.PNG

The profit after tax and EPS increased by even larger percentages. This was thanks to a lower effective tax rate.

Funds raised for clients in H1 increased to £982 million from £529 million the prior year, helped by the £386 million Eddie Stobart Logistics deal.

Costs rose 82% to £25 million, reflecting variable staff compensation. It's a people business, so you don't get operating leverage working the same way as you do with other stocks!

The interim dividend recovers strongly to 4.5p.

Including share buybacks, Cenkos has returned £105.6 million to shareholders since flotation in 2006. I should point out that's significantly greater than the current market cap!

This is what…

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