The broker sees both upside and downside risks for the spread betting platform operator, which has just enjoyed a record year for client acquisition and profitability.
The potential downside risk could come from a greater decline in gross income per CFD (contracts for difference) in fiscal 2022 (FY22) than the 3% fall the broker is currently forecasting, due to lower market volatility and the impact of leverage restrictions in Australia.
“Further downside risk could also come from active CFD client numbers. We forecast investment in marketing spend to increase to maintain the client base at the elevated level reached at the end of FY21. Client acquisition (22k new traders in FY22 vs 27k in FY21) could fall short of our forecast while churn could be higher than our forecast (33% in FY22), following a record year for client acquisition in FY21 and due to the Australian leverage restrictions,” the broker explained.
“The potential opportunity in UK wealth management, for which few details have been shared by management so far, could also present upside in the near and medium-term,” it added.
“The dividend remains an attraction, in our view, offering a 4.4% yield,” the broker said, as it reiterated its ‘hold’ rating.