The Budget has introduced a 25% tax on QROPS - but supposedly only a minority of transfers will be affected. I took caution as the better part of valour (or whatever the saying is) and sold out at a good profit. STM really need to get a statement out quickly about this:
"I concluded in August on shares in cross-border financial services provider, STM Group (STM) that for those looking for a small speculation, I reckon you could do a lot worse and reiterated that in October. The company is now pleased to announce a pre-close trading update
This is with, despite a first half-year profit warning, pre-tax profit to match 2015s £2.7 million. The announcement adds that the integration of the acquisition of London & Colonial made in October 2016 continues to run smoothly, with the anticipated integration gains and contribution to profits expected for 2017 starting to come to fruition and that the pricing initiative taken by the board in the earlier part of the year has significantly increased the take-on of new business for its QROPS international pensions product with new policies for the second half of the year up by circa 50% on the first half of the year and 27% on the second half of 2015.
This is significant since, whilst the pricing results in a reduction in first year profitability, the increased business means increased recurring revenue for future years, with the company concluding that this leaves it well placed to deliver significant growth in revenue and profit in 2017. The shares were 38.5p on my August review and 48.5p on my October one, though commenced this year falling back towards 40p.
However, they are currently back up at 47p on the back of the latest update. This though still only means a market cap of circa £28 million which continues to look good value, particularly given the stated 2017 outlook. I continue to rate the shares a speculative buy."
Another "in-line" trading update (generally, I will cover trading updates more briefly than results statements, especially when they are in-line).
The Board is pleased to announce that the Group has traded in line with market expectations of profit before tax of £2.7 million for 2016 (2015 actual: £2.7 million).
Kudos to the company for quantifying market expectations in this announcement, rather than inviting readers to look it up somewhere else.
Some positive sounds that growth might ramp up in future years, after the flat result in 2017:
As was anticipated, the pricing initiative taken by the Board in the earlier part of the year has significantly increased the take-on of new business for its QROPS international pensions product with new policies for the second half of the year up by circa 50 per cent on the first half of the year and 27 per cent on the second half of 2015. As previously indicated, whilst this strategy resulted in a reduction in first year profitability, it does result in an increased level of recurring revenue for future years. This leaves STM well placed to deliver significant growth in revenue and profit in 2017.
QROPS is a type of overseas pension scheme, which is a bread-and-butter product for STM (a cross-border financial services provider, catering to high-net-worths and corporates).
Checking the STM website, I see they are offering a "zero establishment fee" on QROPS until March 2017 (and presumably until after then, if it is working?)
Tolerance of short-term losses on customer acquisition and customer set-up is a key part of the competitive dynamic in some industries. It looks as if STM have realised that their business model still works with higher losses per customer on set-up.
I have seen first-hand how some businesses will accept customers which won't become profitable unless they stick around for 5-6 years. That works sometimes with long-term products, e.g. with pensions and other financial policies which could be in force for several decades.
STM shares look good value to me against profitability, and the business looks to be in pretty good shape. So I'm not sure what the "catch" is yet. There is usually a catch!"
Finncap have a 65p price target (the price is now up to 48p). They're very positive and say STM is a "unique opportunity for investors to be able to buy this quality situation", given 50% growth this year to 5.9p EPS and with a 2p dividend.
Worth noting also that STM should have a year end cash pile of around £6m-£7m even after the initial LCH acquisition payment (with some obviously required for regulatory requirements), against a £29m m/cap.
I bought a very small holding here recently and then grabbed a further 20k first thing this morning.
Good update this morning. Forecasts for this year after the recent acquisition are now for 5.9p EPS, with a 2p dividend. On that basis I can see a share price of at least 60p-65p if all goes well, compared to the current 42.5p.
In addition, online this morning I could only buy a maximum 100 shares! Whereas I could sell my entire holding at a premium at 41.5p. So it looks like things are primed for further rises:
"STMs July FY trading update was occasioned by slower H1 trading and the impact of the groups tactical reduction of establishment fees. Comfortingly, this mornings trading update reveals promising initial progress from the pricing initiative, with Julys new business levels up 75% over the level prevailing for the first four months of the year. Placing events in context, STM is focused on broadening its introducer base and driving new business volumes, and as part of the process it chose to waive its new business establishment fee, providing a clear market positioning statement by the group. The impact on 2016 forecast PBT will be £1m and effectively rebases profit expectations for 2017 and beyond. The initial share price reaction was abrupt, but deducting £10m from the market cap to cover group cash and a nominal value for other group operations, the pension administration business at £9.0m is valued at 1.1x revenue and 3.2x operating profit... STMs commitment to a value proposition in QROPS to drive growth is now clear and appears not to impair the groups ability to support a growing dividend."
"LSE:STM:STM, a provider of cross-border financial services, had an astonishing 2015. Profits grew quickly and its share price more than tripled to levels not seen since before the financial crisis. News in January that the CEO is to leave wiped a ..."
International focussed financial services business STM Group (STM) grew revenues by 19% to £15.9 million in 2014, with pre-tax profits soaring by 635% to £1.7 million. The firm, which specialises in the administration of assets for international clients in relation to retirement, estate & succession planning and wealth structuring, benefitted from a 36% rise in revenues from its Pensions business and significant operational gearing. While the company does not currently pay a dividend it is hoping to re-introduce a progressive policy as resources allow. The shares soared by 4.5p to 30.5p.
"Working abroad and retiring to Florida or the Costa del Sol is no longer just a pipe dream for many Brits. More highly-skilled professionals are doing it than ever. But before they can they need someone to handle their pension in the most ..."
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