Thursday tips round-up: Brewin Dolphin, Card Factory

28th May 2015 13:19

Brewin Dolphin's share price took a hit despite reporting progress in beefing up its profit margins during its first half. Those improved to 22.3% from 20.8%. However, at 4% its organic rate of growth in revenues - new business won by the existing work force - was disappointing. Rivals are doing better, making the most of the favourable tailwinds for the wealth management industry such as positive demographic trends and the recent pension reform.However, the firm's business model is old-fashioned. It takes commissions from share trades instead of fees based purely on assets under management. As well, chief David Nicol's discipline may have kept a lid on costs at the firm, but possibly at the expense alienating some clients or dampening future growth. So while the company's focus on discretionary asset management is paying off it remains to be seen if the oufit can keep existing clients happy while adding new ones, says The Times's Tempus. "Take profits," Tempus adds.Card Factory continues to put in an impressive performance. Like-for-like sales growth is holding up, the main on-line business is humming along and the company has promised to return cash before the end of the year. The firm is also set on forging ahead with its expansion plans. It now has 783 stores and believes it can grow these to 1,200 in the UK. That, and the company's successful vertically integrated business model, should allow it to keep growing briskly.Nonetheless, the shares now trade on a lofty 19 times earnings estimates for this year. Indeed, should management opt for a special dividend to disburse its excess cash that could put it on a dividend yield of over 5%. Even so, "but over-expansion has left card retailers horribly soggy before. It is only three years since Clinton Cards went bust, so avoid," says Tempus.