News blog
STM Group
- BY: Andrew Hore |
- POSTED: 06/07/2009 |
STM Group’s original trust and corporate services businesses are trading in line with expectations but the newer operations are taking longer than expected to build up revenues which has led to a sharp profit downgrade by former house broker Daniel Stewart.
The Gibraltar-based offshore trust and company management services provider reported earnings per share of 6.5p in 2008. Daniel Stewart has downgraded its 2009 earnings per share estimate by 32% to 4.9p and it is reducing its 2010 estimate from 8p to 6.8p a share.
One of the main culprits behind this downgrade is the new insurance management division where business levels have been disappointing because insurers have found it difficult to raise capital. The life assurance business has also experienced a shortfall in first half revenues but expects to make this up in the second half.
The newly acquired Jersey operations have been hit by delayed contracts and the cost base has already been increased to cope with expansion. This means profits will be lower than expected and income growth is six months behind plan.
On top of this the start-up costs of the new office in Zurich had not been taken into account in forecasts.
The main Gibraltar business did not find it easy and has lost a large chunk of the £600,000 of treasury management fees earned in 2008 due to low interest rates. New client wins and increased activity from existing clients in the corporate and trustee services business have replaced that lost income.
Other businesses, in aggregate, are in line with expectations but the taxation business has been hit by management restructuring.
FinnCap has been appointed joint broker along with nominated adviser Evolution.
At 41p a share, STM is valued at £17.5m. The shares are trading on less than nine times prospective 2009 earnings. The fee-based nature of the business means that its core revenues should continue to be strong.
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