AIM listed STM Group (STM.L) is a multi jurisdictional financial services group, which specialises in the delivery of a wide range of financial service products to professional intermediaries. The group also undertakes the administration of assets for international clients in relation to retirement, estate and succession planning and wealth structuring. Today, STM has operations in UK, Malta, Jersey, Spain and Gibraltar. The Group is looking to expand through the development of additional products and services that it’s ever more sophisticated clients demand. STM has developed a specialist international pensions division, which specialises in UK SIPPs, Qualifying Recognised Overseas Pension Schemes (QROPS) and Qualifying Non UK Pension Schemes (QNUPS). STM has a Gibraltar Life Insurance Company, STM Life plc, which provides life insurance bonds – wrappers in which a variety of investments, including investment funds, can be held.
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On January 24th 2018, STM published a pre-close trading update for the year to 31 Dec 2017, and said it expects to deliver a pre-tax profit of not less than £3.8m (2016: £2.8m). STM said a key component enabling the delivery of record PBT was the International SIPP (ISIPP) product launch, post the March 2017 UK budget announcement. This, along with an annual recurring revenue stream makes up over 70% of STM revenues, giving predictability over the underlying monthly performance. Subsequently on February 24th STM subsidiary STM Malta Ltd announced it had completed the acquisition of Harbour Pensions Ltd. CEO Alan Kentish said investment in the repositioning of STM’s business “brings opportunities in 2018 to improve our profit margins.” Full year results will be published on March 27th 2018.
In January 2018, the VectorVest RT (Relative Timing) metric leapt higher, alerting members to a growth opportunity. RT is a fast, smart, accurate indicator of a stock’s price trend, and despite the stock rocketing from 35p to 54p over a few days, STM still logs a current rating of 1.48 on this metric, which is excellent on a scale of 0.00 – 2.00. Other high scoring metrics include a GRT (Earnings Growth Rate) of 21%, which VectorVest considers excellent. Cautious investors may want to looks elsewhere, as STM currently scores a lowly 0.84 on the RS (Relative Safety) metric (scale of 0.00 to 2.00), but despite this, trading at 50p the stock is still considerably undervalued against a current VectorVest valuation of 65.5p per share.
A weekly candlestick chart of STM.L is shown above over the last three years. The blue line study in the window below price is Earnings Per Share (EPS) which has grown significantly over the period. Since August 2016 the share has charted a treble bottom formation which is positive for the share. STM.L is on a BUY recomdendation on VectorVest.
Summary: Niche finance groups are regularly flagged as buying opportunities across the VectorVest stock analysis and portfolio management system and STM is no exception. This diversified financial services operator continues to develop and expand its portfolio of services for a sophisticated client base, and despite some challenges during 2017, management have not only delivered a record PBT result, but see further opportunities to grow profit margins in the current year. As such, for adventurous investors VectorVest rates the stock as a buy in the run up to FY results at the end of March 2018
Dr David Paul
March 14th 2018
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