Share Search
Visit the Share Search
CMC Markets lifts FY expectations after strong Q4
25th Mar 2021 07:50
(Sharecast News) - CMC Markets lifted its full-year guidance on Thursday following a "strong" fourth-quarter performance.
In an update for the period from 1 January to 24 March, the company said it has continued to perform "very strongly", with ongoing strength in the acquisition and retention of CFD and stockbroking active clients and higher levels of client trading activity compared to regular trading periods.
Client income retention remained well above 80%, but below the levels reported for the first half of 2021.
As a result of the strong performance, it now expects operating income for the year to the end of March 2021 to be slightly ahead of the upper end of the current range of consensus of £399.6m.
"We continue to see ongoing high monthly active client numbers, which for the full year will be over 75,000. Client acquisition levels have remained high during the period driven by increased marketing expenditure," CMC said. "As previously stated, the quality of this year's new cohort of clients remains encouraging as the clients continue to show similarly high value and longevity qualities to prior cohorts."
CMC said this new cohort of clients will contribute meaningful revenue streams into the next financial year and beyond, meaning it now expects to deliver net operating income in excess of £330m for FY 2022.
Chief executive Peter Cruddas said: "Our relentless focus on supporting clients with market leading technology and service has fuelled record growth and puts us in a great position as we start the next financial year.
"Over the last 12 months, market volatility has driven up client activity across the industry. I am particularly pleased that our new clients are demonstrating similar behaviours to existing long-term, high value clients, which supports our longstanding strategy. Our client acquisition rates are very encouraging and reflect the advancements we have made in our technology, pricing and execution of trades."
At 1315 GMT, the shares were up 4% at 462.00p.
Shore Capital said: "It has been a few months since we have had one of these unscheduled updates from CMC but clearly trading momentum has remained very strong.
"We suspected as such reading across from peers' recent news flow, which prompted us to publish another significant earnings per share upgrade as recently as 11 March when we upgraded CMC back to buy. Since then, the stock has moved up sharply. We think today's update should continue to see it trade higher."
The broker said CMC's forecast for net operating income of £330 for FY2022 is ahead of its current estimate of £282m and "should entail an upgrade to 2022F EPS in the order of 20-25%".
"This is the key positive in today's update from CMC and means we remain very comfortable to stay buyers."
Peel Hunt said: "We knew our forecasts were conservative, but this is clearly a very positive change and we increase our forecasts 49% as a result. This implies PBT/EPS of circa £137m/36p, from £91.7m/24.4p previously.
"CMC has clearly benefited from the elevated of trading activity that has prevailed over the last year, but the longer-term benefits are now apparent with a higher level of income expected," the broker said.
"The strength of the platform is important, whether through risk management or general resilience in the face of increased volumes. The stock is now trading on a March 2022E EV/EBITDA of circa 8x (a yield of around 4%), which does not look expensive taking into account the value of the platform and technology, as well as the higher underlying level of profitability. We increase our target price to 595p (from 470p)."
Peel Hunt rates the stock at 'buy'.
In an update for the period from 1 January to 24 March, the company said it has continued to perform "very strongly", with ongoing strength in the acquisition and retention of CFD and stockbroking active clients and higher levels of client trading activity compared to regular trading periods.
Client income retention remained well above 80%, but below the levels reported for the first half of 2021.
As a result of the strong performance, it now expects operating income for the year to the end of March 2021 to be slightly ahead of the upper end of the current range of consensus of £399.6m.
"We continue to see ongoing high monthly active client numbers, which for the full year will be over 75,000. Client acquisition levels have remained high during the period driven by increased marketing expenditure," CMC said. "As previously stated, the quality of this year's new cohort of clients remains encouraging as the clients continue to show similarly high value and longevity qualities to prior cohorts."
CMC said this new cohort of clients will contribute meaningful revenue streams into the next financial year and beyond, meaning it now expects to deliver net operating income in excess of £330m for FY 2022.
Chief executive Peter Cruddas said: "Our relentless focus on supporting clients with market leading technology and service has fuelled record growth and puts us in a great position as we start the next financial year.
"Over the last 12 months, market volatility has driven up client activity across the industry. I am particularly pleased that our new clients are demonstrating similar behaviours to existing long-term, high value clients, which supports our longstanding strategy. Our client acquisition rates are very encouraging and reflect the advancements we have made in our technology, pricing and execution of trades."
At 1315 GMT, the shares were up 4% at 462.00p.
Shore Capital said: "It has been a few months since we have had one of these unscheduled updates from CMC but clearly trading momentum has remained very strong.
"We suspected as such reading across from peers' recent news flow, which prompted us to publish another significant earnings per share upgrade as recently as 11 March when we upgraded CMC back to buy. Since then, the stock has moved up sharply. We think today's update should continue to see it trade higher."
The broker said CMC's forecast for net operating income of £330 for FY2022 is ahead of its current estimate of £282m and "should entail an upgrade to 2022F EPS in the order of 20-25%".
"This is the key positive in today's update from CMC and means we remain very comfortable to stay buyers."
Peel Hunt said: "We knew our forecasts were conservative, but this is clearly a very positive change and we increase our forecasts 49% as a result. This implies PBT/EPS of circa £137m/36p, from £91.7m/24.4p previously.
"CMC has clearly benefited from the elevated of trading activity that has prevailed over the last year, but the longer-term benefits are now apparent with a higher level of income expected," the broker said.
"The strength of the platform is important, whether through risk management or general resilience in the face of increased volumes. The stock is now trading on a March 2022E EV/EBITDA of circa 8x (a yield of around 4%), which does not look expensive taking into account the value of the platform and technology, as well as the higher underlying level of profitability. We increase our target price to 595p (from 470p)."
Peel Hunt rates the stock at 'buy'.