True, Cenkos raised £3.07bn for clients over the course of last year, including £1bn for FTSE 250 constituent BCA Marketplace, but there was a strong first half bias with £2.02bn of the funds raised for clients in that six-month period. Moreover, although second half fundraisings of £1.05bn exceeded the £607m raised in the second half of 2014, it was disappointing to see that second half operating profit declined from £3.3m to £1.3m.
True, the company has faced far more difficult equity market conditions since the second half of last year which has impacted market making, research and commission revenues. Cenkos also reports that the pressure on secondary market commissions shows no sign of abating, including the potential impact of MiFID II in terms of the unbundling of dealing commission and payment for equity research.
That said the company is still doing business and since January has been engaged in a number of significant fund raisings for clients. The current pipeline is “satisfactory given the current market environment”, says chief executive Jim Durkin. However, investors are taking a different view which is why the shares dipped post results and are now trading below my recommended buy in price of 159p ('Broking for success', 20 May 2014).
You should still be in profit though if you followed that advice because the company has paid out 30p a share in dividends since I initiated coverage in May 2014, including interim dividends totalling 13p a share paid last November and tomorrow, and has repurchased 16.3 per cent of the issued share capital at an average of 185p a share through tender offers. I last rated the shares a buy at 180p (‘Capitalising on tender offers’, 19 November 2015), since when the company has paid out a 6p a share dividend and bought back 13 per cent of the share capital at 180p a share.
On a more positive note, Cenkos remains in a strong financial position. Proforma net cash is around £29.7m, or 52p a share after factoring in the payment of dividends post the December year end, a sum equating to 40 per cent of its market capitalisation. However, I feel that given the equity market backdrop the company is highly unlikely to match last year’s performance and investor sentiment is likely to remain subdued. I am therefore exiting this holding and would recommend you to do the same. On a bid-offer spread of 130p to 135p, my advice is sell.
Please note that I have published four columns today, 10 so far this week, and 19 since Monday last week, all of which are listed below. I am still working my way through a number of results announcements and will endeavour to update my views as soon as possible.
MORE FROM SIMON THOMPSON...
I have written articles on the following companies recently:
■ Plethora Solutions: Take profits at HK$0.079 ('On the takeover trail', 14 March 2016)
■ Somero Enterprises: Buy at 150p; target 185p ('A solid buy', 15 March 2016)
■ 32Red: Run profits at 150p ('32Red in the money, 15 March 2016)
■ Communisis: Sell at 44p ('Patience running short at Communisis', 15 March 2016)
■ Global Energy Development: Sell at 27p ('Global Energy plays waiting game', 15 March 2016)
■ Raven Russia: Sell at 30p ('Raven Russia battens down the hatches', 15 March 2016)
■ Stadium: Buy at 122p, new target price 150p ('Switch on for bumper gains', 16 March 2016)
■ French Connection: Buy at 42.75p ('Return to profitability looms for chic operator', 16 March 2016)
■ Fairpoint: Run profits at 159p ('Fairpoints to make', 17 March 2016)
■ Netplay TV: Buy at 10p ('Netplay's shares spin higher', 21 March 2016)
■ Satellite Solutions Worldwide: Buy at 5.5p, target 9p to 10p ('Blue sky tech play', 21 March 2016)
■ Miton: Buy at 30.5p, new target 38p (‘Riding earnings upgrades’, 22 March 2016)
■ Inland: Run profits at 86p, new target 95p (‘Valuation surge boosts Inland’, 22 March 2016)
■ Pittards: Crystallise loss at 71p (‘Subdued demand hits Pittards’, 22 March 2016)
■ French Connection: Buy at 43p ('Stakebuilding gathers pace at French Connection', 22 March 2016)
■ Safestyle: Run profits at 276p (‘Exploiting a window of opportunity’, 23 March 2016)
■ PV Crystalox: Speculative buy at 10p (‘Lights start to glow at PV Crystalox’, 23 March 2016)
■ Arbuthnot Banking Group: Buy at 1340p (‘Banking on a banking duo’,23 March 2016)
■ Cenkos Securities: Sell at 130p ('Cenkos profits slide', 23 March 2016)
■ Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 and is being sold through no other source. It is priced at £14.99, plus £2.95 postage and packaging. Simon has published an article outlining the content: 'Secrets to successful stockpicking
