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Alpha Company Research: Simon Thompson’s profit play on regulations

Our stock-picking expert hopes red tape marks a winning line
Alpha Company Research: Simon Thompson’s profit play on regulations

Expansion of regulatory requirements for asset management houses and financial advisers has proven time-consuming, costly and onerous for these firms. Providing solutions to their problems, however, has proven a lucrative business model for the company identified by Simon Thompson’s latest Alpha equity research report.

Since listing on Aim, this company’s shares have slipped under the radar somewhat but Simon is targeting a 50 per cent-plus return over the next few years, in line with anticipated growth in earnings per share (EPS). As well as robust revenue streams from financial intermediaries, this company makes money from product providers too, so profits from both the ‘demand’ and ‘supply’ side. In Simon’s view, it’s a win-win business model investors are likely to warm to.

The company has a solid market position, with high barriers to entry, is highly cash generative and has a healthy balance sheet. The fact it has recently paid down debts, offers an in-built boost to 2019 pre-tax profits investors may not have fully cottoned onto. Rated on a lower forward price-to-earnings (PE) multiple than its peer group and with arguably less cyclical exposure than these rivals, this is a company that has the potential to deliver stellar returns.

With an important pre-close statement due out later this month, there is incentive to examine and digest the investment case right away, although with an excellent record of organic revenue growth augmented by earnings accretive acquisitions, this looks a good mid to long-term opportunity.    

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