Brewin Dolphin Holdings PLC

Brewin Dolphin Holdings PLC (LON: BRW) is a FTSE 250 index listed United Kingdom-based company, which is a provider of personalised wealth management services.

The Company is likely to 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.

Rationale for Valuation – BUY at GBX 335.26

• Robust Funds: The total funds rose by around 19.5% from £47.6 billion during FY20 to £56.9 billion during FY21, driven by positive net flows and strong investment performance.
• Solid Fundamentals: BRW reported a 12.3% year-on-year revenue growth in FY21 and showed a decent growth of around 12.1% in the final dividend payments.
• Technical Indicator: From a technical standpoint, 14-day RSI (~37.03) is around the oversold zone, while the stock price is close to the lower Bollinger Band.
• Undervalued Multiples: On forward 12-month basis, key valuation multiples (EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow, and Price/Book) are quite lower than the median of the Financials industry.

Key Risks

• Omicron Variant: The Government-led restrictions under Plan B because of an increasing number of Covid-19 cases in the UK may adversely impact the UK Equities.
• Macroeconomic Uncertainty: The ongoing economic instability, potential tightening of monetary policy, subdued consumer confidence, and currency fluctuations can also impact business performance.

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

   (Source: Company result)

• Decent Revenue: The strong market performance and record discretionary gross inflows had resulted in decent revenue 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.

One Year Share Price Chart

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

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

Conclusion 

Following a decent top-line business and profitability growth, it is well-placed to serve the growing demand for financial advice and capture market share through widening the distribution channels. It aims to capture significant synergies and benefits across the business, supporting the objective to achieve double-digit earnings per share growth by 2025. The stock made a 52-week High and Low of GBX 412.00 and GBX 287.00, respectively.

Based on the increased revenue, strengthened capital position, good progress in its growth vectors, business simplification, and favourable valuation conducted above, we have given a “BUY” stance on Brewin Dolphin Holdings PLC at the current price of GBX 335.26 (as on 14 January 2022, at 8:00 AM GMT), with lower double-digit upside potential based on 15.37x Price/NTM Earnings (approx.) on FY22E Earnings per share (approx.).

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

*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.

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