Brewin Dolphin Holdings PLC

Brewin Dolphin Holdings PLC (BRW) is a provider of wealth management services. The Company also offers personalized wealth management services. Its services include Financial Planning, Wealth Management, Managed Portfolio Service (MPS), Investment Management, Advisory and Brewin Portfolio Service (BPS). It engaged in Managed Portfolio Service and Discretionary Management Service.

Financial Highlights (FY 2018, £million)

(Source: Annual Report, Company Website)

The company’s reported total income surged by 8 per cent to £329 millionas compared with the financial year 2017 of £304.5 million. The total fixed operating costs grew from £182 million to £194.6 million. Adjusted profit before variable staff costs rose by 9.7 per cent to £134.4 millionagainst the £122.5 million in FY2017. The group’s adjusted operating profit climbed by 9.6 per cent to £76.7 million as compared to £70 million in FY17. Adjusted profit before tax increased from £70 million to £77.5 million, due to the full year effect of the H2 FY17 acquisition and continued strong discretionary funds inflows. The profit before tax rose by 18.9 per cent to £68.5 million as compared with the financial year 2017 of £57.6 million, driven by the increase in the contribution of acquisition. The reported profit after tax increased from £45.1 million to £53.5 million in 2018. The company’s basic and diluted earnings per share rose by 18.2 per cent and 18.1 per cent to 19.5 pence and 18.9 pence respectively. The management board has proposed the final dividend per share of 12 pence.

Share Price Performance
 
Daily Chart as at May-01-19, before the market closed (Source: Thomson Reuters)

On 1^st May 2019, at the time of writing (before the market close, GMT 12:30 PM), BRW shares were trading at GBX 323.40, down by 1.16 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 392.20/GBX 286.70. The company’s stock beta was 0.84, reflecting lower volatility as compared to the benchmark index.

Recent News
On 29^th April 2019, Brewin Dolphin Ltd, a unit of Brewin Dolphin Holdings PLC, acquired assets of Epoch Wealth Management LLP, a Bath-based portfolio management

Valuation Methodology

*All forecasted figures and peers have been taken from Thomson Reuters.

Growth Perspective and Risk Assessments
The company’s management said that it would be replacing the core custody and settlement(C&S) system over the next 2 years.Potential long-term benefits include improved management of risk parameters and future cost avoidance. The existing C&S system is the oldest piece of Brewin's I.T infrastructure, which has required the most effort to update during recent regulatory changes. Improving the system should mean lower cost of implementing future projects. Uncertainty around Brexit and the wider macro-economic environment has put pressure on the stock lately.

Conclusion
The company’s management is taking the necessary steps to ensure the company is equipped to deliver on its long-term growth objectives.Based on above factors and supported by valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 327.20 (as on 30th April 2019) with single-digit upside potential based on 16.2x NTM Price/Cash flow multiple (approx.) on FY19E cash flow per share (approx.).
 
*The speculative buy recommendation is also valid for the current price as covered in the report (as on May-01-19).

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