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Plus500: Up 77%, Still Undervalued

May 03, 2021 12:35 PM ETPlus500 Ltd. (PLSQF)15 Comments
Aleksandar Vichev profile picture
Aleksandar Vichev


  • As expected, Plus500 adapted successfully to the CFD trading regulations introduced by ESMA in 2018.
  • Increased market volatility in 2020 helped the company post its best annual results ever.
  • Its financial and other metrics are much improved and the new CEO is embarking on a bold but sensible growth strategy.
  • The stock is up 77% since I wrote about it in March 2019 but remains undervalued by ~40%.

CFD concept is shown by businessman
Photo by 8vFanI/iStock via Getty Images

I first wrote about Plus500 (OTCPK:PLSQF) in March 2019. The stock was hovering around 800 pence a share in London, down over 60% in six months. The reason for the freefall were the CFD trading regulations enforced

This article was written by

Aleksandar Vichev profile picture
I have always been fascinated with market psychology and technical analysis, but soon found out that instead of opposing technical and fundamental methods, we should combine them. It is a beautiful symbiosis. Masters degree in Investment Management. Trading and investing since 2012. Co-founder of www.ewminteractive.com.

Analyst’s Disclosure: I am/we are long PLUS500 ON THE LONDON STOCK EXCHANGE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (15)

Plus had a big ebitda number for q1. They are raising revenue guidance for the year. Half the ebitda in q1 came from "customer trading performance".
Vince Stanzione profile picture
I have a big holding in plus500 but also cast your eye over Playtech LSE: PTEC big in gaming software but also owns markets.com - Stay away from $FTCV crazy valuation on Etorro of 10 billion when a few months ago it was doing the rounds privately at 2.5b bless SPACS
Vince Stanzione profile picture
@Vince Stanzione Playtech has just been taken over... all cash bid for near £7
Wimal profile picture
@Aleksandar Vichev Forward revenue and earnings are forecast to decline as per the data here;

Do you agree with this forecast?
Aleksandar Vichev profile picture
@emthree The anticipated revenue and earnings decline is mentioned, explained and considered. Have you read the article?
I agree that Plus is undervalued especially vs CMC markets but I believe this has to do with Plus policy on not hedging and customer trading perfomance (ctp)

Plus do not hedge against clients positions at all although they are reviewing this. What this means is that when clients make a lot, Plus loses a lot and the result is virtually no ebitda.

In 2020 q2 and q4 were extremely disappointing in that fantastic new customer additions and client trading volumes were completely offset by negative ctp - ie clients made money.

I have pointed out that if they continually short a secular rising name which clients are buying, eg tesla, then they may never recover their loss on a growing short. Also it makes no sense to take the other side always of every clients trades. Why would they not hedge if George Soros were trading through them.

So they blew 2 fantastic trading quarters in 2020 - they should have made considerably more profit. This volatility of quarterly ctp vs IG and CMC is what has given Plus a low valuation relative to no of clients and trading volume. In fact CMC has nearly the same market cap despite being much smaller.

The buybacks have been well executed but management have more to prove and need a more sophisticated ai driven hedging system
Georgi K. Kolev, CA & CFA profile picture
@gregmcn hey, what do you mean they are not hedging their positions? From what I read in their annual report, they make 97% of their revenues from fees. Their risk book seemed to be immaterial. I wouldn't imagine they keep their position unhedge and risk to be wiped out in certain circumstances. I mean why would they take any market risk when they are printing money with their capital light platform?

Would you please explain what you meant?
@Georgi K. Kolev, CA
Hi - look at their quarterly reports q4 2020 and q2 2020. Their huge client fees were off set by clients making money and plus500 losing on unhedged client position (client buys tsla, plus short it to them). Plus500 were taking the other side of client trades and not hedging. So in q4 2020 when the market went up a lot (esp tsla), position losses wiped out all the client income.
You should know this - best to run a recommendation by IR contact first.. Have a conversation with their IR contact. They said they were reviewing this no hedging approach early in 2021 in the fy release.
@gregmcn Sorry Georgi, I confused you with the author of the article.
Cyber Needle profile picture
Thanks for a very good article. I believe that scalable technology implies a leading market position in e-marketing and acquisition and a much smaller staff headcount compared to its peers, which may prove instrumental in scaling up the US acquisition.
Thanks for the article. I agree with all your points and we hold a position for clients. I thought the PLUS acquisition was very interesting in the context of its competitor IGG’s recent acquisition. Where Plus500 paid $30m to get in the game sort of speak, IGG paid $1B. If for some reason these don’t turn out (most acquisitions don’t) $30m won’t break Plus but $1B could break either of them. It would seem Plus just needed the license and feels they can grow as they’ve done elsewhere whereas I have no idea what IGG is thinking throwing that kind of money around!
@Aleksandar Vichev Liberum just held a call w the CEO and CFO. It was very good FYI.
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