Will Daniel Stewart Securities PLC Be The Next Quindell PLC?

Alan Oscroft — Wed, 01 Jul 2015 09:15:06 +0000

Those who’ve been following Rob Terry and his stock market ventures will probably be in one of two camps.

You’ll either think, after his Innovation Group failure, and after he was ousted from Quindell (LSE: QPP) at the peak of his optimistic claims (like when he was claiming to be buying shares but was actually selling, and the share price was plunging investors into serious losses), that he’s perhaps not in the same league as Warren Buffett as your guru of choice.

Or genius?

Or, judging by what’s been happening at Daniel Stewart (LSE: DAN) of late, you might think he’s a genius and that the golden touch has so far evaded him through no fault of his own. Daniel Stewart was Quindell’s nominated adviser on AIM up until early 2012, and in recent months Mr Terry has been building up a stake in the broker. After his ownership reached 9.9% earlier this year, he’ll now need FCA approval to take it above 10%, and that’s something he said he plans to do.

What is curious is Daniel Stewart’s recent equity issue and how well it did. After the news broke on 24 June that Quindell is under investigation by the FCA over public statements made during 2013 and 2014, Daniel Stewart shares crashed to a smidgen over 2p — even though it had no relationship with Quindell in the period under scrutiny.

Yet the very next day, the firm raised £1.2m in new cash at a price of 3.35p per share — and I’ve absolutely no idea how it pulled that off. Even as I write, the shares have still only recovered as far as 2.8p.

Best not ask just yet

Meanwhile, Mr Terry has said he will not seek FCA approval for the purchase of more Daniel Stewart stock until after the conclusion of its Quindell investigation (and I think that’s wise — I’m reminded of that old corner-shop sign that says “Please don’t ask for credit, as a smack in the mouth often offends“).

Should you join in and buy up Daniel Stewart shares now? Well, the company has recorded losses in the past two years and there are no forecasts out there — and its shares have been suspended twice already, once due to a capital shortfall, and once after it failed to file its accounts on time.

Which reminds me, Quindell has also failed to get its accounts out when it should and its shares have also been suspended — the firm’s need to rewrite everything in the wake of PwC’s investigation is proving a little time-consuming.

Riches for the picking?

There might be something worthwhile left in Quindell after its Professional Services Division was sold to Slater & Gordon, but the problem right now is we have no measures by which we can assess it.

So will this prove to be third time lucky for Rob Terry? Daniel Stewart and the rump Quindell could turn out to be crocks of gold. Or night soil. But right now, there’s simply no way to tell.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Cenkos Securities PLC Looks Like A Target For Barclays PLC

Daniel Mark Harrison — Wed, 07 Jan 2015 14:45:04 +0000

When stock markets get going after a slump, there’s a trickle-down effect that takes time to work its way through the system. Usually, somewhere in the midst of that trickle, a fountain begins to spew up from a gap in the floor. All of a sudden, the top firms find themselves in need of a fountain head to keep gushing.

So it is in the UK investment banking and advisory market right now. For a real-life example of such trend in action, look no further than gusher Cenkos Securities (LSE: CNKS). Compare the recent rise of this upstart to a dreadful year for top-tier bank, Barclays (LSE: BARC) (NYSE: BCS.US), and it’s easy to see how Cenkos makes for an attractive target for a competitor of pretty much any size bigger than itself.

A Simon Peter That’s Proving The Doubting Thomases Wrong

Last year, Cenkos posted interim profits of £23.5m – representing a 653% increase over the same period in the year before.

While impressive, many investors were a little weary of the results, since around half the company’s H114 revenue came from what looked like a one-time deal: the IPO of insurer AA. However, a round of mayhem in the financial sector mid-year, with Barclays, RBS and Lloyds getting slammed with big fines for mis-selling to their customers, compounded with a slow summer in equity issuances, meant that despite posting stellar profits and showing an increase of 164% in cash on its balance sheet, Cenkos was still trading for peanuts come the end of December.

Right now, Cenkos is selling for around 5x earnings, despite having proven that it can play in the major leagues with much more established competitors.

With a market cap of £115m, there’s simply no better value publicly listed financial services firm on the UK market right now. Let’s look at some of the most compelling facts for the advisor being deeply undervalued:

For a start, there’s that famous AA IPO, which pretty much every analyst in the City wrote off as being overpriced initially. Since June, however, the insurer has jumped 36% in value and it still looks cheap after paying off debt. Unbelievably, AA is starting to look like an enviable client.
Cenkos has also had a number of wins recently fundraising for its other clients, further showing the strength of its distribution power. In the second half of the year, the advisor raised £424.9 million. Those placements will produce an estimated £20-£25m income for that period.
Accounting only for the income derived from private placements conducted in the third quarter of 2014 (estimated at £15m), Cenkos is still trading at a valuation of less than 10x earnings for the period! On top of that are broking and advisory fees, which add up to another 20% on top at least. Contrast this scenario with rivals such as Numis, where the same multiple for the period is – at its most generous – in the 40s, and it’s easy to see the recent value on offer.

Cheap … But Hardly Just Chips

Barclays looks like a firm with distinctly average pools of talent in dire need of reinvigorating their lacklustre and heavily institutionalised investment banking operation. In the past year, Barclays has posted a 16% decline, wiping out all its shareholder’s 5-year gains and making the stock a 15% money-loser for the period.

While Cenkos is up just 44% in the past 5 years, more than half of that has been earned in the past year alone. And the company is still a fraction of the price of any other comparable competitor!

Cenkos is exactly the kind of fountain head gushing from the spring with great management, a bulging client base and a healthy cash position that both firms need to look at to take part in what appears to be a return to exciting times for mid-cap stock issuance.

The post Cenkos Securities PLC Looks Like A Target For Barclays PLC appeared first on The Twelfth Magpie.