CMC dangles new platform push

Is CMC Markets (CMCX) about to step into the retail investor platform game? Though he gave little specific detail away, chief executive Peter Cruddas promised "three big platform developments" next year as he unveiled record results for the period to September.

Recent events  signal why the trader-focused group might back its chances in the less-volatile, but much larger sector. While some peers’ systems stuttered amid the intense market action that followed Pfizer’s positive vaccine news on 9 November, the uptime on CMC’s platform was 99.97 per cent.

Investment here – rather than hikes in marketing spend – is reflected in the 35 per cent growth in the IT team in the period. The successful migration of one million accounts in the fast-growing Australian stockbroking business has added to the confidence, even if the division has only accounted for 11 per cent of net operating income so far this year.

Despite blowing away earnings estimates several times in 2020, the shares look cheap against a consensus earnings forecast of 48p per share for the full financial year. Our concern has long been with the sustainability of these earnings, and whether the stock’s innate hedge to volatility can make way for a genuine growth story.

An EPS forecast of 22p for FY2022 might temper hopes. But as a controlling shareholder, Mr Cruddas’ decision to re-invest cash in recent years, rather than pay out a special dividend as some had urged him now looks vindicated. What comes next is not yet clear, but we eagerly await the group’s next steps. Hold.

Last IC View: Hold, 222p, 11 Jun 2020