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(Alliance News) - Numis Corp PLC is the largest of the London-listed UK stockbrokers by market capitalisation, but its shares are cheap by some measures, suggesting room for price growth, according to a report from Edison Investment Research on Friday.
Numis is valued at GBP372.8 million, significantly higher when compared to GBP58.7 million for Finncap Group PLC, GBP43.1 million for Cenkos Securities PLC, and GBP30.8 million for WH Ireland Group PLC.
All four UK brokers and investment banks offer lower price-earnings ratios and higher dividend yields than US and European counterparts - 9.0 times versus 11.6 times and 3.4% versus 1.2% - according to figures from Refinitiv, as cited by Edison. Similarly, their return on equity at 20.1% beats international firms' 12.7%.
"Numis offers a high yield relative to the non-UK companies, its [price-to-earnings] ratios are below the averages for the US/EU investment banks and advisory firms, and its [return on equity] is high in the range," at 34.0%, Edison said.
On Wednesday, Numis reported that pretax profit in financial year that ended September 30 doubled to GBP74.2 million from GBP37.1 million the year before on revenue of GBP215.6 million, up 39% from GBP154.9 million.
Revenue from Investment Banking rose by 52% to GBP154.9 million, driven by a 45% rise within Capital Markets and a near tripling for Advisory. Equities revenue improved by 14% to GBP60.7 million. Net assets rose by 19% to GBP186.7 million.
Numis declared an 8.0 pence per share final dividend for a 13.5p full-year payout, up 13% from the previous 12.0p annual payout that Numis had made for five years running.
While the first two months of the new financial year have been in line with a year before, Numis said, "it is clear that public markets investors are increasingly adopting a more cautious approach and execution of our capital markets pipeline is subject to greater uncertainty."
Commenting on the results, Andrew Mitchell, financials analyst at Edison said: "Inevitably, after two years of record revenues and with near-term market sentiment less certain, there is a temptation to be wary of the outlook for an investment bank.
"However, Numis has proven resilient through market cycles, has a strong balance sheet and has been successfully pursuing a growth strategy, which includes broadening its activities into M&A advisory, private markets and now international equity capital markets."
Numis were up 2.2% at 326.00 pence midday Friday. They are down 3.7% so far in 2021.
"While the market may be taking a cautious view, given the very strong performance seen in the last two years and near-term uncertainties, it can be argued that the strategic progress the group has made is not being fully captured in [Numis's] valuation," Edison's Mitchell said.
By Tom Waite; thomaslwaite@alliancenews.com
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