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Ben Graham recovery plays

A corporate broker, a specialist residential development finance company and a property fund manager are priced to deliver a profitable outcome with limited downside risk
Ben Graham recovery plays

Corporate broker Cenkos Securities (CNKS:50p) is delivering the profit recovery I envisaged when I suggested buying the shares, at 54p, in my 2020 Bargain Shares Portfolio even if the market is failing to acknowledge the fact.

Excluding previously announced staff restructuring costs of £0.7m which have cut annualised staff costs by £0.8m, and a £0.5m one-off charge to amend the company’s staff incentive plan, Cenkos reversed a small loss in the first half last year to deliver underlying operating profit of £2m. This highlights the benefit of having a relatively low fixed cost base, and a remuneration structure highly geared to performance, which means profit increases sharply in a positive operating cash cycle.

In the first half, revenue increased by more than a fifth to £12.9m, buoyed by 48 per cent higher corporate finance fees of £9.2m, despite slightly lower income from nominated advisor, broking and research work. Eleven clients left the firm mainly due to takeovers and de-listings, but Cenkos won eight new clients to end the first half with 97 clients who generate around £6.5m a year in fees.

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