Hits: 18

15 May 2020

Gresham House  – AGM

Share Price 587p

Mkt Cap £176m

Conflict Disclosure: I Hold

 

 

  • Update An “in line” update seems unusual nowadays. Net inflows over the 4 months were 6.9% of AUM while markets took 3.9% away. AUM is up 13% including acquisitions to £3.2bn. The group also confirms it appointment to manage (through the Aberdeen Standard JV) the SEC mandate.

 

  • Estimates £9.4m PBT is expected for Dec 20. EPS 31.2p.

 

  • Valuation PE 18.8X. 0.9% yield. EV/AUM 4.9%

 

  • Conclusion Historically the shares may have been expensive but with Impax trading on 30X they look comparatively cheap. This unique offering with long term closed ended mandates and perhaps an ESG angle may well get more expensive.

 

27 March 2020

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Gresham House Plc – New Contract

Share price 412p

Mkt Cap £153m

Conflict Disclosure: I Hold

  • Contract Gresham House is appointed investment manager of SEC plc, which will transfer to the Aberdeen Standard JV once regulatory and other approvals are complete. Gresham House will manage the assets while ASI will use its marketing and sales force. SEC plc is the vehicle set up by Tony Dalwood while at SVG in 2005 and has a market cap of £100m while the NAV at Dec 2019 was £181m
  • Estimates No mention of fee rates is provided but the market cap of SEC is c 3% of Gresham House’s £3bn AUM. The greater sensitivity is perhaps what the ASI distribution can bring in going forward.
  • Valuation EV/AUM 4.5%. PE 16.
  • Conclusion With most of the AUM being 20 year fixed life closed ended funds this is a good place to hide, but in this market, my its pricey.

17 March 2020

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Gresham House  – Placing 

Share Price 486p

Mkt Cap 138m

Conflict Disclosure: I Hold

  • Placing The company announced a non pre emptive placing of £8m at 510p/share at 4pm yesterday. The company says it has a pipeline of opportunities it is in advanced stages of assessing. It aims to achieve £6bn AUM (currently £2.8bn) and a 40% margin providing 15% ROIC 
  • Estimates No one really knows much about the shape of P&L’s today. Only balance sheets matter. The company had £19.4m cash, £10.5m contingent consideration and investments of £21.9m at Dec 19.
  • Valuation If we assume the £6bn AUM yielded say 1% revenue at 40% margin we get £24m operating profit. EV/Operating profit for that is 4.5X compared to today’s 10.5X.
  • Conclusion  Driven business on a mission. Current dislocation will help those with strong balance sheets and they may achieve their targets. If that happened the shares could double.

5 March 2020

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Gresham House – FY Results and Acquisition 

Share Price 627p

Mkt Cap £175m

Conflict Disclosure: I Hold

  • Results AUM up 23% to £2.8bn. Revenue up 124% to £32.9m. Adjusted operating profit up 237% to £10.3m. £1.5m of performance fees earned on top. The reported loss of £850k is largely due to £8.5m of amortisation although £2.5m of net losses on investments have also been stripped out. Traderisks, a fund manager and advisory business to housing and social infrastructure sector, is being acquired for up to £11m. AUM is £184m and a medium term ROIC is expected of 15%, being at least £2.25m. The statement says post integration it is expected to make a 40% operating margin which suggest £6.9m revenue, a 3.7 revenue yield, though on gross assets it is 2.1%.
  • Estimates  look to be ahead of the £9.2m forecast, although I am not clear how the losses on investments were dealt with. £10.2m of PBT is the current forecast.
  • Valuation PER 22.8X, Yield 0.7%. EV/AUM
  • Culture The company’s product areas fit well with environmental and social aims, but is slightly let down by the LTIP which delivers 20% of the value add to management.
  • Conclusion With closed ended funds the company should be more resilient in choppy markets than most, and the strong niches the

27 January 2020

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Gresham House Plc– Trading Update 

Share Price 650p

Mkt Cap £181m

Conflict Disclosure: I Hold

  • Update This company doesn’t give quarterly updates so the period covered is 12 months to Dec 2019. AUM was up 20% to £2.75bn. Financial performance is “in line”.
  • Estimates £28.7m revenue is expected for 2019PBT of £7.8m to Dec 2019 delivering £9.2m pre tax profit and 27.5p EPS.is expected, growing to £9m in Dec 2020. EPS 8.7p and a 5.2p dividend. The total dividend for 2019 is expected to be 5p, ahead of the 4.8p forecast.
  • Valuation EV/AUM 5.8%. PER 23.6X Yield 0.6%. Expensive but cheaper than Impax on 31X.
  • Conclusion The bulk of the AUM are held in closed ended funds with an average life of 16 years making the funds very sticky but harder to grow.  For this reason it fits the “buy and forget” box. The shares are expensive but at a relatively small scale of £2.75bn of AUM there is considerable upside over time.

16 May 2019

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Gresham House – AGM update 

Share Price 537p

Market Cap £135m

Disclosure: I hold

  • Update The company updates on 3 areas. Firstly the Strategic Equity and Real Assets division (26% of AUM at Dec 18) “continues to successfully target organic growth”. Secondly that the forestry division (47% of AUM at Dec 18) is expanding internationally with a letter of intent from a major institution for the management of a substantial Irish forestry portfolio. Thirdly it notes the recent £75m raise for GRID to acquire further battery storage projects
  • Estimates The house broker estimate of £28m revenues and £9 ishm PBT for Dec 19 is based on flat AUM of £2.3bn which is too low
  • Valuation PER 18.7 yield 0.9%
  • Conclusion Having acquired Livingbridge the business si now well balanced and is building an organic growth momentum in high growth niches. The shares trade at a premium to peers in my view anticipating upgrades. I suspect the shares will remain expensive and the share price will move with the earnings upgrades as they come through.  I have a more detailed note available for subscribers (£1k p.a if anyone wants)

22 March 2019

Gresham House – JV with Aberdeen Standard 

Share Price 500p

Mkt Cap £124m

Disclosure : I hold

  • JV – Aberdeen is taking a 5% stake in Gresham House and the two companies are forming a 50/50 JV in relation to the Strategic Public Equity process. And this morning it seems that some staff have elected to defer bonus into shares where a 50% enhancement is given on the performance condition of 7% per annum compound growth over 3 years
  • Estimates – House forecasts are for £9m PBT in 2019 and EPS of 29.4p with a dividend of 4.8p before any contribution from this JV
  • Valuation – PER 17X and yield of 1% is a premium to most asset managers
  • Conclusion – This is interesting because it is an example of the distribution strength of a large asset manager being accessed by a niche specialist. With industry headwinds small asset managers are only likely to thrive with a specialist process but small asset managers inevitable have narrower distribution.  How long until the large asset managers start to buy the specialists I find myself wondering.

7 March 2019

Gresham House – FY Results

Share Price 446p

Mkt cap £111m

  • Results Such is the joy of small companies. AUM trebled over the year to £2.3bn. Revenue was up 125% to £14.5m and cash and liquid assets was £32.8m while there is also £10m of bank debt. A modest operating loss of £0.6m was achieved although there was also £2m of acquisition and restructuring costs which were exceptional. A 3p dividend was paid. Two acquisitions were made during the year of FIM Services and the assets of Livingbridge delivering £700k of synergies and the outlook statement refers to visibility of organic growth being identified for all platforms.
  • Estimates look for £22.3m revenue in the current year and £6.6m of PAT which is 27.9p EPS and a dividend of 4.8p
  • Valuation PER 16X  and yield 1%
  • Conclusion  Fund managers ride a lifecycle as the power of momentum is strong and effective. It looks like Gresham House is the new kid on the block with high margin specialist funds. While some fund managers trade at less than 16X this is a play on earnings rather than valuation and I suspect there is an exciting time ahead