• FRP advisory is to list through Cenkos at a £200m valuation. That is 4X historic turnover which compares to Begbies’ 1.8X turnover, courtesy of FRP’s very high 44% operating margin. Perhaps FRP’s brand value or relationships will make the high margin sustainable in the long term.

Frenkel Topping – No discussions  

Share Price 45p

Mkt Cap £34m

Conflict Disclosure: No Holding

  • Statement Harwood Capital entered discussions on 28 January which have now been terminated. The board confirms results are in line with expectations with AUM increasing 15% to £897m at 31 December. Revenues are expected to exceed £8.5m. Ascencia AUM were up 31% to £399m and the company continues to build momentum.
  • Estimates Forecasts anticipate £2.1m PBT and EPS 2.6p. Operating margin 24%.
  • Conclusion The shares were 38p ahead of the announcement of talks which is 14.6X PE.

Polar Capital – Team Acquisition

Share Price 550p

Mkt Cap £531m

Conflict Disclosure: No Holding

  • Acquisition The International Value and World Value Equity team is being acquired from Los Angeles based First Pacific Advisers. The team will establish a JV branded as Phaecian Partners where the economics will be consistent with other teams at Polar.  The team manages $1bn in 3 vehicles which will be reorganised pooled vehicles to a new US series trust. Consideration is 25% of Polar’s normal 55% interest over the first 5 years.
  • Estimates The company expects core EPS will benefit by 0.5p on the existing $1bn AUM but this will be depressed by the revenue share over the first 5 years. Last year core EPS was c 33p so 1.5% enhancement.
  • Valuation The shares trade at 14X Dec 19 earnings. EV/AUM 3.4%.
  • Conclusion Unusually shaped US acquisitions of people businesses is frequently a reason for caution. Financially it looks sensible.  But it takes bravery at a time when markets are high.

Plus 500 – Meeting

Share Price 911p

Mkt Cap £986m

Conflict Disclosure: No Holding

  • Thoughts I was surprised there were no forecast upgrades yesterday, particularly as more share buy backs were announced. With H2 EBITDA up 93% on H1 the 3% EBITDA growth in forecasts looks undemanding. Returning to the screen I noticed the RNS put out at 4.33 the night before results titled “Notice of EGM” was in fact a meeting to change the remuneration of the CEO and CFO. The annual bonus (up to 400% of salary so $1.94m) is determined on EPS growth. The LTIP ($285k) targets are TSR (upper quartile of FTSE 250), EPS growth (12% target), and HR.  This 12 % target compares to the 7% EPS growth being forecast this year. There is also a share appreciation right of $2.5m subject to the achievement of KPI’s “in line with UK corporate governance best practice.” I note the notice of EGM to change the remuneration is “following consultation with shareholder bodies”. Not shareholders.
  • Estimates Australia is expected to reduce at the end of this year. Perhaps 50% which could reduce revenue by 7% but when almost 7% of the market cap will have been spent on share buy backs over 12 months and you still have 23% of the market cap in cash on the balance sheet available for earnings enhancement activities. 12% compound should cause management to break sweat.
  • Valuation 36% ahead of the EPS just reported gives $1.83, putting the shares on 6.5X
  • Conclusion The EGM is in a week’s time on 20 February. We can expect the upgrades at the next update. Shareholder consultation may be more appropriate than shareholder bodies. However, in terms of making money it also means its right to invest.