Brewin Dolphin Holdings PLC (LON: BRW)  

Brewin Dolphin Holdings PLC is an FTSE 250 index listed United Kingdom-based company, which is a provider of personalised wealth management services. The Company focuses on core services of discretionary investment management and financial advice, coupled with improving operational efficiency.

Recent trend of Dividend Payments

The Company will pay a final dividend of 11.10 pence per share attributable for FY21 on 09 February 2022, with an ex-dividend date of 06 January 2022. Moreover, it will take the full-year dividend to 15.7 pence per share, and an increase of around 12.1% in the final dividend from the prior-year levels.

 (Source: LSE; Analysis done by Kalkine Group)

Growth Prospects

• Strategic Priorities: BRW’s strategic priority is to complete the final phased rollout of functionality for the new custody and settlement system by summer 2022.
• Technological Advancement: BRW had anticipated increased capital expenditure of £26 million for FY22 to be incurred towards a large-scale technology project. Furthermore, the implementation of modern technology and an operational excellence programme will drive cost benefits of £1 million in FY22 and £10 million in FY23.
• Robust Funds: The total funds rose by around 19.5% from £47.6 billion during FY20 to £56.9 billion during FY21, driven by positive net flows and strong investment performance. Moreover, BRW had also reported a total discretionary net flow of £1.9 billion at the end of FY21, representing an annualised growth rate of 4.6%.

Key Risks

• Omicron Variant: The Government-led restrictions under Plan B because of an increasing number of Covid-19 cases in the UK may adversely impact the UK Equities.
• UK GDP: The UK economy witnessed a disappointing GDP growth of around 0.1% during October 2021, less than the estimates.
• Bank of England Meeting: The Bank of England meeting lined up later this week may give clarity regarding the interest rate hike decision.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of Brewin Dolphin Holdings PLC.

Janus Henderson Investors [Activist] is the most significant shareholder as it holds nearly 15.31 million shares as of 30 September 2021.    

FY21 Financial & Operational Highlights (for the twelve months ended 30 September 2021, as of 24 November 2021)

(Source: Company result)

• Decent Revenue: The strong market performance and record discretionary gross inflows had resulted in decent revenue growth of around 12.3% to £405.9 million during FY21.
• Profitability: On the profitability front, the adjusted profit before tax grew by around 16.2%, and the margin stood at approximately 22.4%.
• Resilient Balance Sheet: BRW had maintained a decent capital adequacy ratio of 230%. Furthermore, the Company had increased the cash balance from £180.5 million during FY20 to £188.0 million for FY21.

Financial Ratios (FY21)

Share Price Performance Analysis

(Source: Refinitiv; Analysis done by Kalkine Group)

On 13 December 2021, at 09:43 AM GMT, BRW’s shares were trading at GBX 350.50, down by around 0.14% from the previous day closing price. Stock 52-week High and Low were GBX 412.00 and GBX 282.00, respectively.

From a technical standpoint, BRW is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI of ~42.55 supports an upside momentum in the stock price.

Over the last one year, BRW’s stock price has delivered a positive return of ~21.80%, and it has outperformed the FTSE 250 index (benchmark index) with a return of about 16.22% and the FTSE All-Share Financial index (benchmark sector) with a return of around 17.62%.

Valuation Methodology: Price/Book Approach (NTM) (Illustrative)

Business Outlook

The Company had accelerated the growth trajectory in FY21, with a decent top-line business and profitability growth. Furthermore, the Company had expected commission income for FY22 to remain the same as that of FY21. Meanwhile, BRW had anticipated FY22 operating costs to show mid to high-single-digit growth because of the wage inflation and parallel running of systems. The Company aimed to capture significant synergies and benefits across the business, supporting the objective to achieve double-digit earnings per share growth by 2025. In a nutshell, the Company remained well-placed to serve the growing demand for financial advice and capture market share through widening the distribution channels.

Considering the impressive FY21 results, a substantial increase in net funds, decent guidance, consistent dividend payments, strong return on equity, and support from the valuation as done using the above method, we have given a “BUY” recommendation on Brewin Dolphin Holdings PLC at the current price of GBX 350.50 (as on 13 December 2021 at 09:43 AM GMT), with lower-double digit upside potential based on 3.55x Price/NTM Book Value per share (approx.) on FY22E book value per share (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Disclaimer 

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

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