Premier Miton – AUM Update

Share Price 172p

Mkt Cap £272m

Conflict Disclosure: I Hold

  • Update: Net  outflows of 2% over the 3 months to December compares to Polar outflows of 4.4% and Liontrust inflows of 4.8%. Market tailwinds added 4.6% lifting AUM to  £11.6bn at 31 December. Outlook refers to more confidence in the market and progress in creating the management structure post merger and planned synergies from the merger are now underway.
  • Estimates PBT is expected to be £26.6m in the year to Sept 2020 which is expected to rise 16% in the year to 2021 off the back of 6% revenue growth evidencing the cost savings coming through
  • Culture I suspect that the combination of the Guildford based Premier and the city based Miton may result in a more liberated culture.
  • Valuation PE 12.1X for September 2020, falling to 10.7X Sept 2021. Yield 6.1%. EV/AUM 2%
  • Conclusion This is the value play in the space and for a while will remain a cost cutting story. In the short term there is more to be made in the momentum stock of Liontrust but I just can’t help but be attracted to value. A little patience may be required until flows resume post merger. But with Jupiter trading on 14X the value is there. Only M&G is cheaper at 6.3X with a similar 6.1% yield.

AFH Financial – DB transfers

Share Price 354p

Mkt Cap £151m

Conflict Disclosure: No Holding

  • Background There is increasing noise around DB transfers. The FCA are conducting a wide investigation of DB transfers while PI premiums are increasing sharply this year. Yesterday I came across a company set up specifically to harvest DB transfer claims rather like the PPI claims.  And yesterday a welsh IFA, Torch Wealth Management entered administration on the back of SIPP complaints. Harwood Wealth is in the process of going private while shareholders have been obliged to underwrite some of any potential liabilities.  While this is not good for anyone in the industry perhaps it is the regional IFA that may be more exposed, which is reason worry for AFH. While there is no suggestion that any improper transfers have been concluded the cost of defending claims can be high.    
  • Valuation PER 12.2X  October 2019 falling to 10.6X October 2020. Yield 2.3%. The shares have rallied 29% from their October lows on the back of a positive trading statement in November reiterating the company’s 5 year aspirations of £140m revenues and 25% EBITDA margins which is £35m EBITDA. The share trade at an EV/aspirational EBITDA of c 4.7X.
  • Conclusion The next few years are likely to contain more headwinds for the sector generally. It is hard to see a re rating for AFH against that background. Results to October 2019 are awaited.

jeremy@charltonillingworth.co.uk