Numis Corporation PLC

Numis Corporation PLC (LON: NUM) is an FTSE AIM UK 50 index listed independent institutional stockbroker and corporate advisor.

Rationale for Valuation – Speculative Buy at GBX 240.00

• Solid Platform for Growth: Numis’ pipeline also remained robust, and the wider market outlook is positive. It also expects to launch several IPOs in FY22, and continuing progress on its strategic priorities. In a nutshell, FY21 remained an excellent year for Numis, and it well-positioned to generate incremental shareholders’ value.
• Rebound in Momentum: For the four months ending 31 January 2022, Investment Banking revenue climbed 52% year over year owing to a resurgence in IPO volumes and M&A.
• Technical Indicator: From a technical standpoint, a 14-day RSI of ~31.24 is in the oversold territory, while the stock price is hovering close to lower Bollinger Bands, indicating bullish momentum.
• Undervalued Multiples: On a forward 12-month basis – EV/Sales, EV/EBITDA, and Price/Earnings valuation multiples of Numis are undervalued against the Investment Banking & Investment Services sector.

Key Risks

• Subdued Macroeconomic Conditions: The dented risk appetite of investors amid Ukraine war crisis, expectations for further interest rates hikes, and uncertain demand outlook.
• Macroeconomic Uncertainty: As the Federal Meeting has signaled the interest rates hike and monetary policy tightening, it can keep the equity market under pressure.

Financial Highlights (for the year ended 30 September 2021, as on 8 December 2021)

(Source: Company Website)

• Revenue Growth: During FY21, revenue jumped over 39% on FY20, reflecting a strong trading momentum.
• Profit Growth: The profit before tax grew around 100% on FY20, reflecting the benefit of operational gearing. Similarly, net assets were also up by 18.5% year-on-year to £186.7 million.
• Liquidity: It also reported a 7% year-on-year increase in cash balance to £134.1 million (FY20: £125.2 million).

Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

*Peers: Jupiter Fund Management PLC, City of London Investment Group PLC, Rathbones Group PLC, and Liontrust Asset Management PLC.

*All the peers are selected from investment banking and brokerage services sector as classified on the LSE Website. 

Conclusion 

Based on robust revenue growth, strong profit generation, significant progress on strategic priorities, favorable market dynamics, supported by the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Numis Corporation PLC at the closing market price of around GBX 240.00 (as of 10 March 2022).

Nevertheless, 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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