REC:LN
Checked it out quickly:
- The Company is definitely undervalued based on past earnings and its current asset base but check out the trend in their revenue and profit before tax over the last 3.5 years though. Both revenue and profit before tax are deteriorating fast and it doesn't seem like the trend will be reversed for the year-ended March 31, 2012 based on their interim report outlook:
"Record continues to be respected for its currency
expertise and should be well positioned to win new
business. Whilst it is clearly disappointing to have
lost our second largest Dynamic Hedging client in
early November and to continue to see outflows in
the established Currency for Return Forward Rate Bias
Alpha product we think that there are short term
opportunities in both Passive and Dynamic Hedging.
In the medium term, and where recent product
performance is positive, growth in Currency for
Return should emerge."
The impact of losing this client:
"Record received £2.6m revenue from this client in the year to 31st March 2011 and had anticipated a similar level of revenue in the current financial year. Record anticipates that this will reduce Pre Tax Profits by approximately £0.6m for the year ended 31st March 2012."
From their Q3 trading update:
"Record had 40 clients at 31st December 2011, compared to 43 clients at 30th September 2011."
"Chief Executive James Wood-Collins, commenting on trading, said "Although the quarter has seen an overall decline in AuME, we continue to believe we are well positioned to secure further hedging mandates in the current financial year. The decline in AuME is largely due to two events in Dynamic Hedging - namely the previously announced loss of a large client, and our largest client amending their programme with a relatively modest impact on income - and to Currency for Return products, principally active FRB, continuing to see client outflows.
"By contrast, we have seen a number of enquiries and RFPs for Passive Hedging in Continental Europe, in particular Switzerland, and for Dynamic Hedging in the UK. We are optimistic about our prospects with these opportunities and we have been awarded, but not yet started, Passive Hedging mandates including one for CHF1.8 billion. In the longer term, we are also confident that the increased attention being paid to currency risk by US investors will create more opportunities for hedging in that market."
Record will announce its fourth quarter trading update on 20th April 2012."
"Record plc ("Record" or the "Company"), the specialist currency manager, announces today that as at 31st December 2011 the Group's assets under management equivalents ("AuME") totalled $25.4 billion (30th September 2011: $28.9 billion).
AuME expressed in Sterling as at 31st December 2011 totalled £16.4 billion (30th September 2011: £18.6 billion)."
The Company still pays out a large portion of earnings as dividends as most of the earnings are FCF anyways. However, the continuity of this strong dividend depends on whether or not the Company's business returns to historical levels. As of now, it's tough to say if they will, the trend seems to be that clients are pulling funds out. Gonna put it on the watchlist.
P.S. I always get confused by the bloomberg tickers for LN stocks as they're shown differently in terms of pounds vs. pences...
