Financial Grime 24 September 2018

Sep 24, 2018 / Financial Grime

River & Mercantile – FY Results 

Share Price 330p
Mkt Cap £271m

  • Results AUM up 9% to £33.8bn on the back of 7% net inflows over 12 months.  Underlying PBT was £16.1m against £16.4m in the prior year as performance fees reduced from £12.5m to £10.6m. Adjusted EPS is 21.85p (2017A 22.9p) Total dividends were 18.6p for the year representing an 85% pay out ratio. Outlook statement is “well positioned”  and cash is £24m
  • Estimates  Revenue was bang in line with Factset consensus though PBT appears to be a little lower perhaps on account of performance fees.  For 2019 consensus looks for £21.pm PBT which is 18% PBT growth. In the year just finished 72% of revenue was from management fees, 14% advisory fees and 14% from performance fees.
  • Valuation PER is 18 and yield 5.5%.
  • Conclusion It appears that after the CMA review into investment consultants, the dismissal of a fund manager and an FCA investigation into a competition issue a period of calm is in danger of breaking out. Performance has remained in tact and flows have been positive. With strong yield support albeit some of this is dependent on performance fees and regulatory issues subsiding this may be an interesting time for the company, albeit its not quite a “value stock”.

Miton Group – H1 Results 

Share Price 67p

Mkt Cap £115m

  • Results  35% increase in AUM over 12 months is a strong number and today we learn that since the period end the company has added a further 6% to AUM in the 2 months since the June period end. Adjusted PBT was £4.4m, up 51% from £2.9m last year. Cash is £21m. EPS up 47% to 2.25p. Outlook is “encouraging”.
  • Estimates Full year PBT estimate is £8.5m of which 52% has been delivered in H1.  It would take a weak market for the company not to beat full year estimates
  • Valuation Dec 18 PER is 16 and yield 2.6%. This assumes a 34% payout ratio for 2018 which given the £21m cash on balance sheet I suspect we are entering a period where we experience some dividend surprise as Mr Barron reaches for the white rabbit in his top hat. EV/AUM is below 2%.
  • Conclusion The valuation at EV/AUM is the wrong price below 2%. The company is in a period of operational leverage as it scales and over the next few years margins could increase from 30% to say 45% as AUM can also grow significantly while the dividend surprises. That would imply a fair value above 3% of AUM which is 50% valuation upside ignoring earnings growth.

GLI Finance – H1 Results 

Share Price 9p

Mkt Cap £27m

  • Results The company has achieved an operating profit of £1.1m of which 260k came from lending to associated companies in Fintech Ventures which have experiences a £8.3m in value. There is also a £2.1m goodwill impairment which creates a loss for the period overall of £9.3m.
  • Valuation NAV is £64.1m of which £23.9m is the reduced valuation of Fintech ventures.  If we wrote this off the NAV would be £40.2m.  At that level with £58m of debt in issue the company would be 1.45X geared.  The current market cap is a 30% discount to the NAV is Fintech ventures is written off. However  the NAV of £40m also includes £22m of goodwill.
  • Conclusion the advent of operating profits is encouraging that there is some value to be realised here. It is likely to be in Sancus BMS which is generating the profits.  Perhaps a little early yet but there may be a time for this one