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Does IntegraFin face a price battle?

Analysts at Numis believe competition could soon pressure Transact's premium model
May 21, 2020

IntegraFin (IHP) – the group behind financial adviser platform Transact – saw growth in each of its key metrics for the six months to March, as rising client and adviser numbers and a healthy 14 per cent uptick in gross inflows offset market declines to boost funds under direction by 1.7 per cent to £35bn.

IC TIP: Hold at 495p

Average client money was actually 9 per cent higher over the course of the period, owing to the timing of the equity rout in late February and March. This, combined with a slight dip in staff and occupancy costs, meant IntegraFin’s operating margin crept up to 50.6 per cent.

That dealing charges make up such a small proportion of revenues suggests market volatility is not a pre-requisite to maintaining this level of profitability. But client stickiness – as represented by the 97 per cent rate of revenue which is recurring – certainly is.

On this point, investor attention is drawn to analysis from Numis, which believes the launch of AJ Bell’s lower-cost Investcentre “represents a meaningful increase in competition for Transact”. Is this a broker talking up a client’s book? Perhaps. But IntegraFin may soon feel added pressure to justify its premium pricing model.

Analysts at Peel Hunt have lifted their adjusted earnings forecasts from 11.3p to 11.8p per share for the September year-end.

IntegraFin (IHP)    
ORD PRICE:495pMARKET VALUE:£1.6bn  
TOUCH:497-498p12-MONTH HIGH:530pLOW:350p
DIVIDEND YIELD:1.6%PE RATIO:37  
NET ASSET VALUE:36.3pNET CASH:£130m*  
Half-year to 31 MarFee income (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201947.617.35.492.6
202053.83.06.792.7
% change+13-83+24+4
Ex Div:04-Jun   
Payment:26-Jun   
*Includes lease liabilities of £7.2m