Liontrust  – Trading Update

Share Price 1115p

Mkt Cap £610m

Conflict Disclosure: No Holding

  • Update: Net inflows were a storming 4.8% in the 3 months to Dec 19. Market appreciation added c 5% and then the Neptune acquisition added £2.73bn bringing AUM to £19. 1bn. Performance is generally strong. The statement talks of 4 investment teams having AUM above £1bn as the company is keen to play down any suggestion of concentration risk.  Economic Advantage is now 40% of AUM and the sustainable team is 28% at £5.3bn.  This is close to double the AUM at the time the sustainable team was acquired from Alliance Trust underlining what can be termed “revenue synergies”. The outlook refers to optimism about further sustainable inflows from non UK investors.
  • Estimates To add 10% organic in 3 months is quite a performance.  With a March year end we may get some modest upgrades today. March 2021 revenue is expected to increase 24% while AUM is up 70% on where it was 12 months ago. 
  • Culture The vibrant culture and transparent remuneration policy encourages me to relax about any concentration risk. This feels like Jupiter at the time of its IPO.
  • Valuation PE 19.6X for March 2020, falling to 16X March 2021. Yield 2.9%. EV/AUM 3%
  • Conclusion This sector is one to be a momentum investor in.  The momentum feeds on itself and lasts a long time. There are a few years to go yet, evidenced by the confident statement. No longer cheap but further to go.

Polar Capital – Trading Update

Share Price 566p

Mkt Cap £546m

Conflict Disclosure: No Holding

  • Update Net outflows were c 4.4%% in the quarter to December. AUM decreased from £14.3bn to £14.2bn after the market mitigated much of the outflows. Performance fees are estimates at £8.8m versus £26.3bn in the prior year. Much of the outflows were from the North American fund where clients reallocated to alternative assets.
  • Estimates A 26% reduction in PBT is anticipated for the year to March 2020
  • Culture: The incentive scheme combined with the performance fees can make this stock more cyclical then peers and this is a down time.    
  • Valuation PER 15X March 2020. Yield 6% EV/AUM 3.1%
  • Conclusion No doubt the share will turn but this is a momentum sector so I personally wouldn’t be tempted to buy value.

Rathbone – AUM Update

Share Price 2130p

Mkt Cap £1,200m

Conflict Disclosure: No Holding

  • Update Investment management net outflows of 0.8% in the 3 months to December while Unit Trusts had net inflows of 4.2%. Markets helped so AUM was up 2.5% over the quarter. Outlook refers to being focussed on objectives set out in the October strategic updates and expected volatility. In October the company guided to lower margins and lower organic growth.
  • Estimates  130p EPS is expected for Dec 2019 which is expected to grow 7% in the year ahead
  • Valuation PE 16.4X Dec 2019, yield 3.4%. Brewin PE is also 16.4X.
  • Conclusion The likelihood of corporate activity is perhaps increasing as Rathbone de rating brings it into line with Brewin on the back of the October update.  That could make this exciting again.  As central cost pressures increase in the sector synergies from corporate activity could be very significant.

jeremy@charltonillingworth.co.uk