Numis Corporation PLC

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

Upcoming Event: On 8 December 2021, Numis expects to release final results for FY21.

Rationale for Valuation – SPECULATIVE BUY at GBX 339.00

• Positive Outlook: As pipeline remained robust, wider market outlook appears positive.
• Good Momentum: Numis delivered a strong performance in Q4 FY21 and maintained its positive momentum. Given the favourable market backdrop, the Group has increased its capital allocation and delivered growth in top-line and bottom-line items.
• Guidance: FY21 revenue is expected to be around £215 million (FY20: £154.9 million), and thus, profits are expected to be higher than FY20.
• 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

• Macroeconomic Risk: The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial markets.
• Market Risk: The Company is also exposed to market risk with high volatility in equity market, and loss of clients with subdued investors’ sentiments.

Trading Update (for the year ending 30 September 2021, as on 30 September 2021)

• Revenue Growth: During FY21, revenues from Investment Banking division grew considerably to £150 million in FY21 (FY20: £101.7 million).
• Revenue Expectation: Revenue for H2 FY21 is expected to be higher than H2 FY20, reflecting a significant volume of COVID related capital markets transactions.
• Bright Prospects: 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.

Share Price Chart (since 02 February 2021)

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

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative) 

Conclusion 

FY21 remained an excellent year for Numis, and it well-positioned to generate incremental shareholders’ value. The M&A and private markets transactions contributed significant revenue and market share gains. It also experienced resilient research payments, and good activity levels in UK equities. Therefore, the Company’s prospects look appealing to invest at the current level. The stock made a 52 week High and Low of GBX 419.86 and GBX 286.00, respectively. 

Based on robust revenue growth, strong profit generation, significant progress on strategic priorities, favourable market dynamics, supported by the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Numis Corporation PLC at the current market price of around GBX 339.00 (as on 02 November 2021 at 08:28 AM GMT), with lower double-digit upside potential based 9.16x Price/Earnings (approx.) on FY21E 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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