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

BRW 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 15.70 pence per share, and an increase of around 12.10% in the final dividend from the prior-year levels.

 (Source: LSE; Analysis done by Kalkine Group)

Growth Prospects

• 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 Q1 FY22 Divisional Performance: The financial planning income rose by around 25.3% from £9.5 million during Q1 FY21 to £11.9 million during Q1 FY22. Moreover, BRW had also reported a 25% increase in MPS and Voyager income, driven by improved market performance and growth in the Voyager fund range.
• Strategic Initiatives: BRW’s strategic priority is to complete the final phased rollout of functionality for the new custody and settlement system by summer 2022.

Key Risks

• Federal Reserve Meeting: The latest Federal Reserve Meeting indicated an interest rate hike by March 2022. Thus, it may cause a significant decline in Global Equities.
• Sluggish UK Macroeconomic Indicators: The UK Composite PMI fell marginally to 53.4 in January 2022 from 53.6 in December 2021, while the UK consumer price inflation breached a nearly 30-year high of 5.4% in the 12 months to December 2021.
• Market Risk: Any volatile movement in the market or forex could have a material impact on the operations of the Company.
  

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 31 December 2021.       

Q1 FY22 Trading Update (for the three months ended 31 December 2021, as of 26 January 2022)

• Boost in Total Income: Higher funds and strong market performance caused an year-on-year increase of around 8.9% in the total income from £95.9 million for Q1 FY21 to £104.4 million during Q1 FY22. Moreover, new clients represented approximately 65% of discretionary fund inflows.
• Increase in Total Funds: The Company had shown a decent growth of around 3.7% in the total funds to £59.0 billion since the end of FY21.
  

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

(Source: Company Filings)

• Top-Line Business: The strong market performance and record discretionary gross inflows had resulted in decent income 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 31 January 2022, at 10:03 AM GMT, BRW’s shares were trading at GBX 324.73, up by around 0.85% from the previous day closing price. Stock 52-week High and Low were GBX 412.00 and GBX 287.00, respectively.

From a technical standpoint, BRW is hovering between the lower Bollinger band and the middle Bollinger band, supporting an upside potential in the stock price. Moreover, the 14-days RSI of ~36.94 indicates a bullish price momentum.

Over the last one year, BRW’s stock price has delivered a positive return of ~9.80%, and it has outperformed the FTSE 250 index (benchmark index) with a return of about 6.96%.

Valuation Methodology: Price/Book Approach (FY22E) (Illustrative)

Business Outlook

The Company has replicated the positive business momentum of FY21 in FY22 and delivered a decent year-on-year growth in the total income during Q1 FY22. Furthermore, the Company had depicted a record business performance with £1.0 billion of discretionary inflows during Q1 FY22. 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 positive business momentum during Q1 FY22, a substantial increase in net funds, consistent dividend payments, decent 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 324.73 (as on 31 January 2022 at 10:03 AM GMT), with lower-double digit upside potential based on 3.02x Price/NTM Book Value per share (approx.) on FY22E book value per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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