Investment bank and asset manager Shore Capital (SGR:270p) was woefully undervalued when I included the shares in my 2018 Bargain Shares Portfolio. That’s still the case.
Interim EPS increased by 10 per cent, and Shore Capital’s balance sheet is as rock solid as ever. The value of net cash, gilts, and listed equities equates to 148p a share, which means that the shares – trading in line with net asset value of 270p – are rated on just six times underlying 12 month rolling net profits. They also offer a 3.7 per cent dividend yield.
| 2018 Bargain shares portfolio performance | |||||
| Company name | TIDM | Opening offer price on 02.02.18 (p) | Latest bid price on 17.09.18 (p) | Dividends (p) | Total return (%) |
| Parkmead | PMG | 37 | 60.2 | 0 | 62.7 |
| PCF | PCF | 27 | 41 | 0.19 | 52.6 |
| Sylvania Platinum | SLP | 14.5 | 22 | 0 | 51.7 |
| U and I Group | UAI | 205 | 232 | 15.5 | 20.7 |
| Shore Capital | SGR | 213 | 240 | 5 | 15.0 |
| Titon | TON | 159.86 | 180 | 1.75 | 13.7 |
| Crystal Amber | CRS | 207.2 | 229.1 | 2.5 | 11.8 |
| Conygar | CIC | 160 | 172 | 0 | 7.5 |
| Record | REC | 43.3 | 41.6 | 1.65 | -0.1 |
| Mpac | MPAC | 156 | 137 | 0 | -12.2 |
| Average | 22.3 | ||||
| Deutsche Bank FTSE All-Share tracker (XASX) | 427.3 | 410.5 | 16.54 | -0.1 | |
| Source: London Stock Exchange share prices. | |||||
Asset management was the stand out performer, as was the case last year when the unit delivered a 50 per cent hike in pre-tax profits to £3m on revenues of £12.9m. First half pre-tax profits from these activities trebled to £1.3m on revenues up by almost half to £7.3m, helped by a 13 per cent rise in assets under management to £915m. Puma VCTs (launched in 2005) and Puma Alpha Enterprise Investment Schemes (launched last autumn) remain in demand, having raised over £300m from investors since inception. Shore Capital’s property finance business, which private clients can access through an investment in Puma Heritage, is proving popular too having grown net assets to £60m in the five years since launch. The same is true of Puma Aim Inheritance Tax Service which has delivered a 12.5 per cent compound annual growth rate for investors in the four years since inception. Asset management is now a major part of Shore Capital’s activities, generating half of group pre-tax profits in the six-month period, a reliable source of income to offset the more volatile market making and capital markets activities.
An upbeat trading outlook, hefty asset backing and a growing asset management arm are sound reasons why Shore Capital’s shares should command a decent premium to book value. Buy.
■ Simon Thompson's new book Successful Stock Picking Strategies can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. It is being sold through no other source and is priced at £16.95 plus £2.95 postage and packaging. Simon's second book Stock Picking for Profit has been reprinted and is available to purchase online at www.ypdbooks.com for £16.95, plus £2.95 postage and packaging, or by telephoning YPDBooks on 01904 431 213 to place an order. Details of the content of both books can be viewed on www.ypdbooks.com.
