Numis Corporation PLC (LON: NUM)

Numis Corporation PLC is an FTSE AIM UK 50 Index Listed UK based independent institutional stockbrokers and corporate advisors. The Company offers multiple services such as research, execution, corporate broking and advisory to companies listed in the United Kingdom and its investors. The Company offers research, trading, investment companies, corporate finance, corporate broking, principle capital fund managers limited, Numis indices and asset management. The Company serves corporate clients and institutional clients. It is managed as an integrated corporate advisory and stockbroking business.

On 8 December 2021, NUM would release the FY21 results.

Recent trend of dividend payments

 (Data Source: LSE Website, Research done by Kalkine Group)

The board of the Company remains confident about the growth and has followed a steady dividend policy of paying GBX 12 per share since FY16. In H1FY21, the Company paid an interim dividend of GBX 5.50 per share, which was paid on 18 June 2021.  

Growth Prospects

• Positive Market Trend: The UK and the global market are seeing a bullish movement once in a decade after the volatility due to Covid-19. The industry is seeing solid growth in M&A activities at the end of H1FY21. The reduced level of volatility supports the IPO market, and the supportive market conditions are likely to continue going forward.
• Driving Growth by Focusing on High-quality Companies: The Company have a strong and growing corporate client base characterised by ambitious high-quality companies of all sizes, whether public or private. A solid corporate client base provides long-term captive revenue opportunities. In addition, the Company plans to provide a natural home for exciting and ambitious small-cap companies, which will drive growth in the long term.
• Plans to Increase Market Share: The ECM transaction-related revenues are the leading source of transaction revenue for the Company. NUM saw growth in market share in FY20 for the first time since FY16. The Company has maintained its reputation by expanding its corporate client base. The Company plans to leverage its position as the market leader with improved market conditions and further strengthen its position.
• Developing Complementary Products & Services: NUM plans to increase its advisory revenues to diversify its revenue stream and provide multiple services to the client. The Company aims at becoming the leader in the private market and target non-UK revenue opportunities.

Key Risks 

• Market Risk: The risk of loss arising from potential adverse changes in the value of the Company's trading book due to the high volatility in equity prices.
• Loss of Clients: If Company fails to provide services or results according to the needs of the clients, then it could hurt the potential revenue and reputation.
• Regulatory Risk: The risk that new regulations or changes to the interpretation or implementation of existing regulations adversely affects operations and financial condition.
  

Now we will analyse some key fundamental and shareholders statistics of Numis Corporation PLC. 

Trading update for Q3FY21 (for three months ended 30 June 2021, reported on 14 July 2021)

• The Company delivered a solid performance in Q3FY21 with revenue exceeding £50 million, mainly due to a lower base in FY20.
• The Investment Banking and Equities are continuing to benefit from the investment made in enhancing the quality of client base and talent pool and the growth initiatives undertaken by the Company.
• The Equity business continues to deliver robust performance; however, market volume declined marginally on a QoQ basis.
• The management expects deal volumes to reduce over the summer in line with the typical seasonal trend, while the pipeline for the remainder of the year and into next remains very strong.

Financial and Operational Highlights (for six months ended 31 March 2021 as of 07 May 2021)

(Source: LSE Website)

• The Company delivered strong performance across all business segments, driven by the recovery in UK equity markets and improved investor sentiment.
• The Company successfully improved its operating margin from 14.5% in H1FY20 to 33.6% in H1FY21.
• The favourable market conditions led to more than 100% growth in the Investment Banking division revenues.
• Substantial trading gains and further market share gains with institutional clients led to a 27% increase in Equities revenue.
• The proposed office in Dublin will provide a strategic opportunity to leverage Capital Markets capabilities in Europe. 
  

Financial Ratios (H1FY21)

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 24 September 2021, at 11:27 AM GMT+1, NUM’s shares were trading at GBX 355.14, down by around 1.08% against the previous day closing price. Stock 52-week High and Low were GBX 419.86 and GBX 286.00, respectively.

On a daily chart, NUM's price is sustaining between the middle and lower Bollinger bands. Hence, there could be an uptick in the stock price in the near term.

Over the last two years, NUM’s stock has delivered a decent positive return of ~47.36%. Also, it has outperformed the FTSE All-Share Financial index with a return of about 40.78% and the FTSE AIM UK 50 index with a return of about 8.25%. 

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

Business Outlook

NUM delivered an excellent performance in H1 FY21, with revenue growth of 89.2% YoY driven by improved market outlook and bullish market momentum. NUM remains focused on increasing corporate clients and product categories while taking advantage of its market leadership to expand the new markets. The Company benefitted from the improved market conditions, and decreasing volatility also increased the IPO's. The management expects the momentum to continue in H2FY21 and its expansion plans are likely to drive growth in the near term.

Considering the positive market outlook, increased market share, improved profitability and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Numis Corporation Plc at the current price of GBX 355.14 (as on 24 September 2021 at 11:27 AM GMT+1), with lower-double digit upside potential based on 8.71x Forward Price/Book Value per share (approx.) on FY21E book value per share (approx.).

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

*All forecasted figures and Peers/ Industry 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.

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