Directors Dealing
The Group has also been suffering in Japan in recent months following the crackdown by the regulator on leverage levels that can be offered to retail traders although, to be fair, this is less than 5% of the Group’s global trading revenue and is not likely to be a smoke signal for issues in other regions. The vast majority of the Group’s net trading revenue was derived from equity index trading by predominantly UK clients (almost 50% of revenue), and together with the Australian activities, this is the most profitable area for the Group. The company’s ‘own funds’ cash balance increased to £388m and adjusted for broker party margin requirements sat at £192m — so called “net own cash available”. Stripping out intangibles, the Group’s Net tangible value is just over £300m and the Group’s current market Cap is £1.6bn. The stock is also supported by a well covered dividend yield of 5% and the PE is not demanding at 12 times — in line with the market.
IG Group Chart
32 | www.financial-spread-betting.com | September 2012
If, however, the recent stock sales prove to be a precursor to a slowing in the rate of growth for IG, or, indeed, should an out of the blue trading statement occur (always an occupational hazard in the volatile world of spreadbetting), then the chart below gives a clue as to the magnitude of a potential fall. A move down towards the 200p level would still be twice book value and, as we have seen with relative peer Man Group, book value doesn’t always stem a share price decline. We can see from the technical picture that the stock has been tracing out a large wedge formation for just over 2 years now. What looks worrisome to us as technicians, however, is the ‘dead cross’ formation (where the 50 day moving average crosses through the 200 day moving average and the stock price trades below them both) that has occurred, and also the falling RSI that is cutting below the key 50 centre line. These are signals that bulls should pay close attention to and, in fact, should there be any more pressure to the downside that takes the shares back towards the 400p level, indicate potentially a good outright short candidate.