"We had the $500 million market cap milestone. Now that this has been reached, and we've checked it off, the next target is a company value of $1 billion," Plus500 Ltd. (AIM: PLUS) CEO Gal Haber told "Globes" in an interview.
Plus500, an online trading platform for contracts for difference (CFDs) in stocks, indices, commodities, foreign exchange, and ETFs, closed at £2.72 on London’s Alternative Investment Market (AIM) on Tuesday, giving a market cap of £313 million ($511 million). The return on the share since its IPO at £1.15 is 140%.
Haber's optimism is understandable; few IPOs, even with the present market rally, have offered such a return so soon afterwards. He says that he is not surprised by the market response. "I think that we're a really good company, and the multiple at which Plus500 is traded is still low compared with its peers."
According to "Reuters", Plus500 is traded at a p/e ratio of 14 on its 2013 results, compared with its larger, but slower growing, rivals, such as IG Group Holdings plc (LSE: IGG) and FXCM Inc. (NYSE: FXCM), which are traded at p/e ratios of 14 and 18, respectively. The latest survey by UK investment bank Liberum Capital (which underwrote Plus500's IPO) says that Plus500 is traded at a p/e ratio of 18 on its 2014 results, compared with 14 for IG Group and 16 for FXCM. However, this report was written on November 20, after Plus500 announced that its financial results for 2013 would greatly exceed the market forecasts.
This announcement sent investors scurrying for Plus500 shares, boosting it 50%, narrowing the gap in the p/e ratio with its rivals, and raising questions whether the share can continue to rise, at least until the publication of the financial report for the first quarter of 2014.
The optimistic Haber is not afraid to say, "Even under the current circumstances, Plus500 should be worth much more. So long as we meet forecasts, quarter after quarter, which is what I intend to do, I hope that we'll be traded at a higher multiple. My goal is to ensure that the business is ticking and growing, in which case good things will happen."
Haber says that it is impossible to know whether a new client comes from one of Plus500's competitors, because the company does not ask this question during the registration process. "We ask few questions that are not necessary to create a process that is as user-friendly as possible," he says, adding, "Plus500 continues to grow aggressively in the British market, which is its main market. I therefore think that it is almost certain that the company is taking market share from its competitors."
Haber disputes the argument that a large part of the company's growth is due to the current market rally. "Trading in CFDs is dominant in times of high market volatility, not in a rising or falling market. It doesn’t matter for a company like Plus500 whether the market is falling or rising. What matters is the economic buzz, in other words, a lot of economic news. When there is quiet, and nothing is happening, that is the worst thing for us. The second half of 2012 was like that."
Haber attributes Plus500's success to the speed at which it responds to customer demand. "Take Twitter Inc. (NYSE: TWTR) for example. Three minutes after it was floated, we enabled trading in CFDs on its share."
Haber is unperturbed by the increase in the number of CFD companies in the UK. "Yes, competition in the British market is growing, but that bothers me less. Plus500's technology and marketing methods helps it stay much more competitive than the other players. In addition, the British is market is far from saturated. There is room for many players, and I feel great in my market."
Published by Globes [online], Israel business news - www.globes-online.com - on December 5, 2013
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