RECORD PLC INVESTMENT FIRST LOOK

Founded in 1983, Record PLC is a lesser known financial investment dealing with foreign currency.

Their main selling point is to help mitigate losses for clients from adverse currencies movements. It involves hedging.

Trading announcement

Today, saw Record increase its AUM to $58.2bn. There is also a mandated termination of $1.2bn. But a more effective assessment is to look back at the past five years.

Record PLC; – Five-Year Review

Table 1

 

 Record's AUM

Let start with Record’s Asset under management. The currency hedger saw increasing amounts to cash inflows and increasing number of clients.

The continued risk of low interest rates still persistent.

 

Table 2

 Record profit and loss

Revenue remains stagnant at £20m in 2016, lower than 2011 (£28m). Both operating and net profits are down. But margins remain high at 30%.

 

Table 3

Record assets

The biggest asset item is cash. It accounts for 50% of all assets. That wasn’t the case back in 2014/15 when it drops from £30m to £12m. Now, it holds £22m.

Table 4

Record liabilities

Total current liabilities coming in at (£3m), the firm doesn’t have any long-term liabilities. This gave shareholders’ equity an extra boost.

Currently, standing at £37.7m.

 

Table 5

 Record cash flow

Cash flow earnings pattern is similar to net income. At the moment, it is generating £6.3m.

The reason why cash balance (see table 3) fell to £12m was the purchase of £15.5m in money market instruments.

For much a small business, they sure pay a good dividend. The downside is the payment varies from one year to the next.

 

Table 6

 Record's Management Pay

No doubt, management pay is on the high-side, accounting for 10% of total revenue. Don’t be surprised because most financials look after their employees because they helped to win the firm clients. If the employees go they take their clients with them. And these businesses are employee focused rather than shareholders.

 

Table 7 

 Record's management shareholdings

Having said that, management holds most of the shares. Its founder Neil Record hold 71m shares out of 221m, a 30% ownership. If you add up the total shareholding from management it comes to 104m shares, nearly 50%

Table 8

 RECORD SHARE PRICE

The share price is near a six-year high at 47 pence, giving it a valuation of £104m. This stock was trading below 10 pence, four years ago, for £22m.

 

Table 9

Record PLC's market metrics

If we do a basic market metrics analysis, Record PLC looks materially overvalued.

Price to earnings reaches 20 times, a similar multiple with cash flow. The earnings yield hasn’t kept pace with market valuation, coming in at 5.21%.

The biggest behind this overvaluation was the 80% share price appreciation since Donald Trump won the U.S. presidency. Maybe the looser financial regulations would benefit the business.

P.S. The shares did trade over £1, before the financial crisis.

If financial stocks are hot again then expect to see Record perform better, which justify the shares appreciation.

 

Final Thoughts

At this stage, the shares are overvalued. The question here is how high can the stock market rise? Are we close to another recession? Are tight financial regulations becoming a norm? Will the Bank of England ever raise interest rates?

If not, then Record PLC valuation is fully-priced!

 

Is Record PLC look overpriced in the market?

Disclosure

The opinions expressed by the writer is for entertainment and research purposes. It does not constitute professional investment advice. Data is correct on available information at the time.

Finally, the writer does not own the company’s stock, unless stated otherwise.