Shore Capital Group

LN: SGR

£47.5m market cap

220p last close

Shore Capital Group is an independent investment group with three main areas of business: Capital Markets, Asset Management and Principal Finance (on-balance sheet investments). It has offices in Guernsey, London, Liverpool, Edinburgh and Berlin.

Investment summary

Shore Capital has agreed to acquire Stockdale Securities which has 41 employees, 53 small and medium-sized corporate clients and dealing relationships with 200 institutional clients. The initial cash consideration is £4.9m with a maximum deferred payment of £4.0m subject to revenue targets. The price to book and earnings multiples to be paid (FY18 numbers) would be 1.6x and 7.5x, even on the maximum potential payment. The enlarged group will benefit from scale, increased client diversity and, we assume, some cost synergy. Given successful integration, the deployment of part of Shore’s available capital into an operating activity should benefit both returns and the valuation.

Y/E Dec
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2016A 39.4 6.3 2.4 5.8 37.9 N/A
2017A 41.9 6.9 4.6 12.8 17.2 N/A
2018E 42.2 5.2 4.1 11.5 19.1 N/A
2019E N/A N/A N/A N/A N/A N/A
Last updated on 15/03/2019
Industry outlook

Increased equity market volatility has created a more challenging background for SGR and particularly for Capital Markets with potential delays in equity issuance and M&A activity. Nevertheless, activity continues and the Stockdale acquisition should be enhancing. A resolution of some of the macro uncertainties could prompt a bounce-back in corporate activity. Asset Management appears well positioned to grow further and is looking to use its track record in private client tax-efficient products for institutional investors.

Last updated on 15/03/2019
Share price graph
Balance sheet
Forecast net debt (£m) 21.2
Forecast gearing ratio (%) 341
Price performance
%
1m
3m
12m
Actual (4.4) (2.2) (21.4)
Relative* (4.7) (8.0) (21.9)
52-week high/low 285.0p/200.0p
*% relative to local index
Key management
Howard Shore Chairman
Michael Van Messel FD