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Plus500 increases customers, but FCA review looms

The CFD specialist is gaining new customers rapidly, but it could soon be subject to new leverage limits
February 8, 2017

Like some of its peers, contracts-for-difference (CFD) specialist Plus500 (PLUS) pulled in customers responding to the impact of political shocks on the market last year. The Israel-headquartered group - which allows customers to take long and short positions on a variety of market instruments via CFDs - gained more than 104,000 new customers during 2016, up almost a quarter on the previous year.

IC TIP: Hold at 439p

However, a high churn rate relative to peers meant active customers grew at the slower rate of 14 per cent to almost 156,000. Trading in commodities and equities was particularly strong during the politically turbulent third quarter, and increased marketing spending during the first six months seemed to have paid off. Customer acquisition costs then fell by more than half during the final quarter of the year, which should help margins recover.

The group gained new trading licences in New Zealand and Israel, which management hopes will enable it to diversify its revenue stream further. With cash generation up a fifth, management recommended yet another special dividend.

Analysts at house broker Liberum reduced its forecasts for adjusted pre-tax profits to $110m, from $164m, for the 12 months to December 2017. This gives EPS of 71.5ȼ, down from a previous estimate of 106.8ȼ.

 

PLUS500 (PLUS)

ORD PRICE:439pMARKET VALUE:£504m
TOUCH:438.8-440p12-MONTH HIGH:785pLOW: 311p
DIVIDEND YIELD:16.1%PE RATIO:5
NET ASSET VALUE:118ȼNET CASH:$137m

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (ȼ)
2012*5623.17.3na
201311567.24735.73
20142291388980.08
20152761288484.05**
201632815210288.52**
% change+19+19+215

Ex-div: 2 Mar

Payment: 3 Jul

*Pre-IPO figures

**Includes special dividends of 33.62ȼ a share in 2015 and 27.29ȼ a share in 2016

£1=$1.25