This report is an updated version of the report published on 26 May 2022 at 07:40 AM GMT+1.

IG Group Holdings PLC

IG Group Holdings PLC (LON: IGG) is an FTSE 250 listed financial technology entity that is focused on providing traders and investors with cutting-edge technology through its suite of platforms and applications.

Investment Rationale for Valuation – Buy at GBX 716.00

• Q3FY22 Performance: Revenues during the quarter increased by 13% to £257.2 million, compared to £226.7 million in the prior corresponding period.
• Robust Client Base: During Q3FY22, the Group reported an increase in the number of active clients to an all-time high of 292,200, from 220,900 reported in Q3FY21.
• Strong Interim Performance: In H1FY22, the company clocked net trading revenue growth of 16% to £471.9 million, compared to H1FY21. Profit before tax grew by 8% to £245.2 million during the period.
• Technical Indicator: The stock is hovering between the lower and middle Bollinger band with a 14-day low RSI level of ~35.32.  

Key Risks

• Regulatory Risk: The company’s business is prone to the purview of Government regulations and measures. It also has to maintain sufficient regulatory capital in order to cover risk exposures.     
• Market Risk: Equity markets have been very volatile recently owing to macro concerns like record inflation levels and hike in interest rates.

Financial Highlights (for the period Q3FY22 YTD, as of 16 March 2022)

(Source: Company Website)

• Segment Performance: Revenue in Q3FY22 YTD in the High Potential Markets stood at £100.2 million, reflecting an increase of 22% on a pro forma basis on Q3FY21 YTD.
• Net Trading Revenue: The Group reported YTD revenue from continuing operations at £729.1 million, including the foreign exchange hedging gain in Q1. This reflected an increase to the adjusted net trading revenue of £635.3 million in Q3FY21.

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E)

*Peers: Few peers considered are Jupiter Fund Management PLC, Liontrust Asset Management PLC and Close Brothers Group PLC.

*All selected peers are LSE-listed Companies from the Financial sector.  

Conclusion

The management anticipates FY22 revenue to moderately exceed current market expectations.

Based on the decent fundamentals, revenue uptick, strong client base and support from the valuation as done using the above method, we have given a “Buy” recommendation on IG Group Holdings PLC at the closing market price of GBX 716.00 (as on 25 May 2022) with lower double-digit upside potential based on 9.39x Price/NTM Earnings (approx.) on FY23E earnings per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

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.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

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 unfavorable movement in the stock prices.

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