Concerns about valuation
After hitting 2 100c a year ago, this stock has been moving lower, trading at 1 200c ahead of results due at the end of May.
As I write this, we’ve had no trading update and I don’t expect the results to shoot the lights out. The announcement will also be accompanied by the details of the rights issue to pay for Sygnia’s purchase of the five Deutsche Bank (DB) x-tracker exchangetraded funds (ETFs).
The rights issue will result in dilution and while the purchase makes lots of sense, it is being done at a price-to-earnings (P/E) ratio of around 10 times. But Sygnia will surely drop the fees on the ETFs, making the purchase P/E higher?
I like its business model but have been concerned about the valuation. Now we’re starting to reach a decent price, but I want the rights issue out of the way first. For those who already hold Sygnia, I would continue to hold as the worst of the sell-off is likely over, although I do expect some more downside over the next few months.
The rights issue will result in dilution and while the purchase makes lots of sense, it is being done at a priceto-earnings (P/E) ratio of around 10 times.