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STM Group – updates on “Budget Changes” as shares hit hard

By Steve Moore | Thursday 9 March 2017


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Having been above 50p, shares in cross-border financial services provider STM Group (STM) are currently down to around 35p on the back of the Budget including, what the company describes as, “significant charges and tax implications for some individuals considering taking out a ‘Qualifying Recognised Overseas Pension Scheme’ transfer from a UK pension scheme”.

It notes these are not anticipated to impact existing QROPS business, “which generated recurring revenue from annual management charges of approximately £8.4 million in 2016” (a little under 50% of total group revenue), but that 80% of new QROPS business (that generated from outside of the European Economic Area) could be affected, adding;

“Having spoken to intermediaries, they have advised that in certain cases, and for certain countries, their clients may still look to transfer their pension to a QROPS policy despite this charge. Intermediaries will be carrying out extensive research over the coming weeks to analyse the impact of the proposed new tax charge further. Furthermore, they have advised that whilst a QROPS might not be such an attractive proposition for their clients, they would look to promote a UK SIPP alternative. We therefore hope that an increase in new applications for our UK SIPP business may mitigate some of the impact.”

Hmmm. The likes of “may” and “hope” reflect clear uncertainty, whilst broker to the company finnCap, adjusting estimates to remove 80% of forecast new business flow into QROPS in 2017, derives circa 30% downgraded earnings of around 4p per share.

I previously suggested that those looking for a small speculation could do a lot worse at 38.5p and most recently retained positivity earlier this year. FinnCap considers what it states as “worst-case numbers which are underpinned by recurring income” and, resultantly, its now 48p target price as “very modest”. However, with the growth uncertainty, my stance for now is hold.


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