Siebert Financial Corp (NASDAQ: SIEB), Weak EPS Growth

Company overview



Siebert Financial Corp  (NASDAQ:SIEB), which was incorporated on April 9, 1934, is a holding company that offers retail discount brokerage services through its subsidiary, Muriel Siebert & Co., Inc. (Siebert).  The principal activity is providing online and traditional brokerage and related services to retail investors. The company is also an investment advisor through a subsidiary, Siebert Investment Advisors, Inc. (SIA), which offers advice to clients regarding asset allocation and the selection of investments. Another subsidiary, Siebert’s Women’s Financial Network Inc. Provides products, services and information devoted to women’s financial needs.  The company develops and maintains its retail customer base through printed advertising in financial publications, Internet advertising and social media..



The Retail Division includes discount brokerage and related services, independent retail execution services, retail customer service, retirement accounts, customer financing, and information and communications systems. The focus in its discount brokerage business is to serve retail clients seeking a selection of investment services, including trading through a broker on the telephone, through a wireless device or through the Internet, at commissions that are lower than those of full-commission firms. It clears its securities transactions on a fully disclosed basis through National Financial Services Corp. (NFS), a subsidiary of Fidelity Investments. It serves investors making their own investment decisions. The company assists its customers in their investment decisions by offering services, including access to account information. Through its SiebertNet, Mobile Broker, inter-active voice recognition and Siebert Brokerage Express services are available to customers. It allows customers to indicate online interest in buying or selling fixed income securities, including municipal bonds, corporate bonds, mortgage-backed securities, government sponsored enterprises, unit investment trusts or certificates of deposit.



It operates retail offices in New York, New York; Jersey City, New Jersey; Boca Raton, Florida, and Beverly Hills, California and uses a Customer Relationship Management System that enables representatives to view a customer’s service requests and the response thereto. It’s telephone system permits the automatic routing of calls to the next available agent and offers customers a range of self-directed retirement accounts for which it acts as agent on all transactions. Each individual retirement account (IRA), simplified employee pension (SEP) IRA, ROTH IRA, 401(k) and KEOGH account can be invested in mutual funds, stocks, bonds and other investments in a consolidated account. Customer’s margin accounts are carried through its clearing agent, which lends customers a portion of the market value of certain securities held in the customer’s account. Margin loans are collateralized by these securities.



The data technology platform is provided by the clearing agent, NFS and offers an interface to NFS’ main frame computing system, where all customer account records are kept and is accessible by its network. It’s systems also utilize browser based access and other types of data communications and representatives use NFS systems, by way of its technology platform, to perform daily operational functions, which include trade entry, trade reporting, clearing related activities, risk management and account maintenance. The data technology platform offers services used in direct relation to customer related activities, as well as support for corporate use. These services include e-mail and messaging, market data systems and third-party trading systems, business productivity tools and customer relationship management systems. The voice network offers a call center feature that can route and queue calls for certain departments within the organization. Additionally, the systems call manager offers reporting and tracking features, which enable staff to determine how calls are being managed, such as time on hold, call duration and total calls by agent.




The business environment


The working capital is invested primarily in money market funds, so that liquidity is not materially affected. The recent financial crisis did have the effect of reducing participation in the securities market by our retail customers, which had an adverse effect on revenues.On November 9, 2015, the Company sold its 49% membership investment in SBSF back to SBSF for $8,000,000 of which $4,000,000 was paid in cash and the balance of which was paid in the form of a secured junior subordinated promissory note of $4,000,000 (the “SBSF Junior Note”). The sale of the investment in SBSF represented a strategic shift based on its significance to the financial condition and results of operations and the major effect it will have on the operations and financial results. The investment was sold for approximately $448,000 less than the carrying value of the investment at November 9, 2015.


Results of operations for the quarter ended 31. March 2016.


The company had net losses of $ 501,000 and $ 1,534,000 for the quarters ended 31. March 2016 and 2015 respectively. Total revenues for the quarter came to $ 2.5 billion, a decrease of 4.8% over the same period in 2015. Commission and fee income for the quarter was $ 2.1 million, a decrease of 12.6% over the previous year and the retail commission ticket counter was down 23.1%. Trading profits were $ 265,000 for the quarter, an increase of 56.8% from the previous year. Because of overall increase in customer trading in the debt markets. Income from interest and dividends was $ 143,000, an increase of 104.3% over the previous year because of receivables from business sold to affiliates and the sale of equity interests offset by reduction of interest from the expiry of a secured demand note. Total expenses for the quarter were $ 3 million, a decrease of 12.2% over the previous year. The assets are highly liquid consisting of cash, money market funds and commercial paper and total assets at the end of the quarter were $ 16.7 million of which 51.8% are regarded as highly liquid.


The bottom line


We see the main strengths of the company in its satisfactory stock price performance, but note that the weaknesses include weak EPS growth and an unsatisfactory return on equity. The stock presently quotes at $ 1.65 representing a gain of 37.5% over the previous close and the market capitalisation is $ 36.4 million.



I’m a Chartered Accountant by qualification and have extensive experience in the financial services industry. I have held senior positions in the HSBC group and have also been a consultant to ANZ Grindlays Bank and the Thomas Cook Group. I have written thousands of articles and received more than 60 five star reviews for my work.

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TNS Contributor Info

Ramuskrishnan Iyer

Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.

Source: Traders News Source