Plus500 is a company based in Israel that provides trading services online to retail customers. The company was started in 2008 by six former students of the Technion Institute of Technology. They are Gal Haber, Elad Ben-Izhak, Alon Gonen, Shlomi Weizmann, Shimon Sofer and Omer Elazari. It started with $400,000 as the initial investment amount which was provided by the Alon Gonen, the company’s managing director.
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Plus500 LTD has undergone development and is operational as a trading platform online for retail customers for trading CFDs internationally with over 1,700 various underlying financial instruments globally which are comprised of ETFs, commodities, equities, foreign exchange and indices. The group enables trading of CFDs by retail customers in over 50 countries.
The trading platform can be accessed from a number of operating systems (Windows, Smartphones (Android and iOS), the tablets (Android and iOS) and from the internet). The directors believe that the Group’s success has primarily been due to the proprietary technology it developed and is still continues to develop so as to support the platform for trading. The trading platform’s design is very intuitive and very easy to use. The trading platform is localised into 30 languages. The directors believe that this technology emphasis together with the targeted online marketing strategy by the Group has been helpful in differentiating it from its competitors.
The revenues generated by the group on the trading platform are principally from dealing spreads. Additionally, revenues are also generated from overnight premiums. Customers do not get charged commissions on trades by the Group. The operations of the Group are conducted from three offices located in London (United Kingdom), Sydney (Australia) and Haifa (Israel). The parent company’s (Plus500 Ltd) shares are listed on the London Stock Exchange’s Alternative Investment Market.
Plus500 Share Price: State of Affairs
The regulators last May derailed Plus500- the retail trading platform after it demanded that all operations by the company in the UK be stopped and resolve its procedures for anti-money laundering.
To make things worse, the company last year went through a fruitless merger with Playtech, the Israeli gambling software company.
It was not until January this year that all issues got to be fully resolved- but in that time still, the company managed to grow revenues.
- Plus500 which is Atletico Madrid’s shirt sponsor on Wednesday released its full year results, showing:
- Revenue up to $275.6 million by 20% (£193.2 million);
- Net profit down to $96.6 million by 5.7% (£67.7 million);
- Earnings margin down to 48.2% from 63.6%.
Although profit and margins took a hit from dealing cost having regulatory problems, it very incredible that the company still managed to grow revenue.
The company based in Israel and with a listing on London’s AIM market said that this was down to new active customers and new customer sign ups— people trading on the platform for the first time after they deposit funds.
Plus500 allows people to trade the risky financial instruments which are leveraged called CFDs (Contracts for differences). Essentially, CFDs are bets placed on whether a commodity price, currency or share price will go up or down. The punter who makes the bet either loses or wins in increments depending on how far or close the asset is to the predicted price.
Last year Plus500 was told by UK’s FCA (Financial Conduct Authority) to freeze all customer accounts in UK and stop the new client on-boarding to its UK business (It’s also operational in Australia, Cyprus and Israel) until it gets to fix issues with its procedures for anti-money laundering. It’s only until last month when new clients started on-boarding to the UK business.
Investigations that were subsequent by BI got to reveal that the Financial Conduct Authority was likely tipped off by rivalling CFD brokers who distrusted the technology heavy approach of Plus500 to regulation and on-boarding. In its results the company says that new sign-ups and 65% of revenues last year came on mobile phones.
The company was also subjected to a low ball takeover bid by Playtech which is an Israeli gambling software company. This eventually got abandoned.
Despite having weathered this storm, Gal Haber the founder and CEO has decided to step aside so as to take over the role of managing director in April. He is to be replaced by Asaf Elimelech who currently is in charge of a number of subsidiary businesses of Plus500 and was Plus500 Australian CEO prior to that.
While the revenues in 2015 increased, some two numbers exist likely to cause worry to investors. The average cost of getting new users last year jumped to $1,227(£860) while the revenue per user averagely fell to $2,019 (£1,415) by 7% by 33%. This implies that the company is spending more on marketing so as to sign up new customers who are spending less.
Somewhat illogically then, the company says that increase in the sign-up costs of customers is set to proceed as higher value customers are continually being obtained.
How is Plus500 Share Price (LSE: PLUS) Fairing?
After the group published its 2015 results, the financial trading firm’s shareholders got to nudge the shares by 4% higher.
Revenue rose to $275m which is a 20% increase while the numbers of customers rose by 29%, this despite all problems experienced last year. While the gross profit margin of the firm fell to 48.2% from 63.6%, the earnings per share were way ahead of expectations at 58p, or $0.84, versus the $0.71 per share forecasts.
The group has plans of returning all of these profits to shareholders through special and ordinary dividends which total to $0.8405 per share. This is equivalent to a huge 10.9% trailing dividend yield at the share price currently.
Looking ahead, the company said that for future dividend payments it has plans of maintaining a 60% pay-out ratio, with an option of paying additional special dividends or buyback shares. Currently, the share is trading at 9.2 times and trail earnings having a 6.6% ordinary dividend yield.
A general view is that these shares probably are valued quite fairly. For Plus500 share price, the earnings visibility is likely to be always poor as the market conditions strongly influence customer activity.