Cenkos Securities' (LON:CNKS) H117 result was strong with a pre-tax profit increase of over 150% bolstered by the Eddie Stobart IPO, which provided further evidence of the company’s ability to complete larger transactions as well as a flow of smaller deals. The second half has started well and, subject to market conditions, the pipeline is reported to be healthy. Our FY17 earnings estimate has been increased by nearly 11%. Revenue and profit are subject to market fluctuations but the business model of contained fixed costs and high variable compensation mitigates the impact of this. The valuation both in terms of P/E and yield appears cautious.
H117 Results
Cenkos’ first half revenues increased by more than 90% from H116 and were 3% ahead of the stronger H216, reflecting the contribution from fees generated by the £386m Eddie Stobart Logistics IPO and a generally improved market background that fed into strong market-making profits. Continuing pressure on commission rates meant that corporate broking, research and commission revenue was down 15%. Variable compensation contributed to an 82% increase in costs from H116, which still left pre-tax profits (£4.2m) 156% up on the prior year period and, with the benefit of a lower tax charge, earnings per share were five times last year’s level at 6.1p. The interim dividend proposed is 4.5p compared with 1.0p.
To read the entire report Please click on the pdf File Below: