Brewin Dolphin Holdings PLC

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

Rationale for Valuation – BUY at GBX 251.00

• Strong Momentum: BRW unveiled continued organic growth momentum, and reported discretionary inflows of £1.0 billion in Q1 FY22, reflecting the benefit of advice-focused strategy.
• Decent Platform to Capture Market Growth: The financial planning income rose by around 25.3% from £9.5 million during Q1 FY21 to £11.9 million during Q1 FY22. Moreover, BRW had also reported a 25% increase in MPS and Voyager income, driven by improved market performance and growth in the Voyager fund range.
• Technological Advancement: BRW had anticipated increased capital expenditure of £26 million for FY22 to be incurred towards a large-scale technology project. Furthermore, the implementation of modern technology and an operational excellence programme will drive cost benefits of £1 million in FY22 and £10 million in FY23.
• Improved Dynamics: The UK Service PMI has grown to 60.5 in February from 54.1 in January, as businesses recovered from the Omicron wave.
• Technical Indicator: From a technical standpoint, 14-day RSI (~23.11) is around the oversold zone, while the stock price is close to the lower Bollinger Band.
• Undervalued Multiples: On a forward 12-month basis, key valuation multiples (EV/Sales, EV/EBITDA, and Price/Earnings) are quite lower than the median of the Investment Banking & Investment Services industry.

Key Risks

• Macroeconomic Risk: The Russian invasion in Ukraine has already jolted the market, while the slow retail growth and battered consumer spending in the UK amid rising fuel costs can keep the equity market under pressure.
• Gloomy Outlook: The year 2022 is expected to be the year of inflation, Central Bank tightening, and wage pressure. All these factors can hurt the corporate profits and equity markets.
  

Q1 FY22 Trading Update (for the three months ended 31 December 2021, as of 26 January 2022)

• Boost in Total Income: Higher funds and strong market performance-driven an year-on-year increase of around 8.9% in the total income from £95.9 million for Q1 FY21 to £104.4 million during Q1 FY22. Moreover, new clients represented approximately 65% of discretionary fund inflows.
• Increase in Total Funds: The Company has shown a decent growth of around 3.7% in the total funds to £59.0 billion since the end of FY21.

One Year Share Price Chart

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

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

*Peers: Rathbones Group PLC, Hargreaves Lansdown PLC, and Brooks Macdonald Group PLC.

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

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 240.00, 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 251.00 (as of 7 March 2022, at 8:45 AM GMT), with lower double-digit upside potential based on 11.91x Price/NTM Earnings (approx.) on FY22E Earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for 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 is 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. 

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.

Disclaimer 

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.