Plus500 drives operational progress despite reduced volatility

Plus500 (PLUS) made strides towards the completion of its three strategic objectives through 2023, although the pressure on earnings and underlying margins that were evident at the half-year mark persisted through the reminder of the year.

Management said that results were “significantly ahead” of market expectations “despite lower levels of trading activity across global financial markets during the year”. Indeed, the CBOE Volatility Index (VIX), a standard measure for tracking volatility, dropped to four-year lows in December, providing a stark contrast to events in the prior year.

The reduced trading activity translated into a 25 per cent drop in cash profits to $341mn (£271mn) with the underlying margin shrinking by eight percentage points to 47 per cent. Even with product and platform expansion to the fore, the provider of tech-based trading platforms will always be subject to the vagaries of capital markets – matters essentially beyond its control – but shareholders can take solace in the group’s operational performance, along with an additional $100mn in share buybacks and a special dividend of 55.5ȼ a share.

Through the year, Plus500 introduced a new share dealing platform, along with futures and options products. A new retail FX OTC trading platform was launched in Japan. And it also expanded its portfolio of global regulatory licences, while achieving a record high average deposit per active customer.

Shareholders are aware that external factors will invariably effect volumes, but the unavoidable ups and downs are set against the $2.1bn that the group has returned to shareholders since its initial public offering in 2013.

Despite a flurry of new investments, the group retains a strong cash position, yet the enterprise/cash profit (EV/Ebitda) multiple of 2.5 times still represents an attractive valuation relative to industry peers and from an historical perspective. Buy.

Last IC View: Buy, 1,475p, 14 Aug 2023