Hits: 15

9 July 2020

Polar Capital–AUM Update

Share Price 485p

Mkt Cap £477m

Conflict Disclosure: No Holding 

  • Update Polar has broken its run of 3 consecutive quarters of net outflows. AUM grew 25% over the 3 months to June to £15.2bn. Net subscriptions were 4% off set by 2.4% outflows from closing the UK Absolute Equity fund.
  • Estimates AUM is now 3.4% ahead year on year while the £138m anticipated revenue compares to £119.5m net management fees last year and £22.5m performance fees. 
  • Valuation EV/AUM 2.5%. PE 12.2, Yield 6.8%
  • Conclusion This has the hallmarks of a turning point and I can’t recall this company trading at such a low valuation. For those that want technology exposure c 43% of the AUM are in technology funds.

22 June 2020

Polar Capital – FY Results

Share Price 493p

Mkt Cap £495m

Conflict Disclosure: No Holding

  • Result AUM has gone up 18% between 31 March and 29th May rising to £14.4bn. Core operating profit down slightly to £41.6m and PBT down 21% to £50.8m. EPS 43.5p. DPS 33p. Net cash £107.8m. Outlook “well positioned”. 33% of the AUM are in the technology funds and 16% in the healthcare funds which underperformed relative last year but new fund launches may help.
  • Estimates PBT is in line with estimates and in the current year a 16% revenue decline, 20% PBT decline is currently forecast. With AUM now close to where it was 12 months ago this is likely to be upgraded. 
  • Valuation EV/AUM 2.7%. Liontrust trades at 4.7%. PE 12X. Liontrust trades at 25X
  • Conclusion The valuation differentials are becoming extreme amongst the fund manager winners and losers. This remains a play on tech and healthcare while liontrust is a play on IP traits and ESG. Having underperformed in the hot sectors it is hard to get excited yet, but the valuation is too low today. In 2017 Polar’s average PE was 22X.

9 April 2020

Polar Capital – Trading Update
Share Price 400p
Mkt Cap £386m
Conflict Disclosure: No Holding

Update Net outflows of 1% is a significant improvement on the 8.5% in the prior quarter. With market falls AUM was down 14.5% over the quarter to £12.2bn. No mention of salary cuts or dividend policy.

Estimates Forecasts for the year to March 2021 are for flat revenues from March 2020 which may be aggressive given AUM is 12% lower year on year.

Valuation EV/AUM 2.4%. On March 2021 current estimates PE is 11.7X and yield 7.7%

Conclusion With reduced net outflows the company could be close to turning. The shares have rallied 40% from their low 2 weeks ago. Plenty to go for.

13 February 2020

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.

9 January 2020

Polar Capital – Trading Update 

Share Price 566p

Mkt Cap £546m

Conflict Disclosure: No Holding

  • Update Net inflows 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 £23.6bn 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.

10 October 2019

A picture containing clipart

Description automatically generated

Polar Capital – AUM Update 

Share Price 532p

Mkt Cap £513m

Conflict Disclosure: No Holding

  • Update No 3 months numbers reported today immediately raises suspicion. Net outflows over 6 months were £448m. With net inflows of £150m in the quarter to June this implies net outflows of £598m in the 3 months to September, which is 4.1% of AUM. AUM is now £14.7bn. Net performance fees accrued are £4.2m, down from £32.5m the year before. The Japan team has lost a fund manager and £400m of AUM while two long standing clients have redeemed £500m from the technology and healthcare fund.
  • Estimates No performance fees are in forecasts but the outflows may surprise today causing perhaps some downside risk to numbers
  • Valuation PER on existing forecasts 12.8X with a yield of 6.3%. EV/AUM 2.8%
  • Conclusion Earlier this year the shares were 450p. Given these are momentum stocks the shares could revisit that level.

11 July 2019

A picture containing clipart

Description automatically generated

Polar Capital – Trading Statement 

Share price 580p

Mkt Cap £559m

Conflict Disclosure: No holding

  • Statement AUM up 6.4% over the 3 months comprising net inflows of 1.1% and 5.3% performance.
  • Estimates AUM is now back to where it was in September 2018 at £14.7bn. Pre performance fees to March 19 the company made £42.2m PBT which is forecast to be £53m for the year to March 20.
  • Valuation PER 13.6, yield 5.8%. EV/AUM 2.8%
  • Conclusion The shares are cheap on earnings forecasts that are about right. Liontrust has £14,097m AUM and can be bought for £392m while Polar has £14,712m and can be bought for £559m.

24 June 2019

A picture containing clipart

Description automatically generated

Polar Capital Plc – FY Results 

Share Price 582p

Mkt Cap £561m

Conflict disclosure: No Holding

  • Results – PBT is up 55% to £64.1m. AUM of £13.8bn at end of March has grown to £14.1bn at 31 May.  5 new funds were launched in the year.  Core operating profit was up 52% to £42.2m on the back of net management fees increasing 25% from average AUM up 23% demonstrating operating leverage. Core operating margin was 34% and performance fee margin 46%.  Performance fee profit was £24m (2018 £15.3m). EPS up 41% to 51.5p and dividends for the year were 33p.
  • Estimates – Results modestly ahead of the £63.3m consensus PBT. For the year to 2020 consensus looks for £135m revenue which compares to £113m management fees received last year. That look light given the continued growth in AUM.
  • Valuation PER is 14.5X yield 5.6%.
  • Conclusion  The company looks set fair given the recent fund launches feeding the pipeline and the momentum of the current AUM.  I suspect as the fund supermarkets gain dominance we are in a new era of niche fund managers prospering rather like the dominance of the retail supermarkets has led to a proliferation of craft beers and craft cheeses.  This is an incubator of craft funds and is set to prosper as long as they stick to their specialisms.  

11 April 2019

Polar Capital – Trading Update  

Share Price 510p

Mkt Cap £483m

Disclosure No holding

  • Update Net inflows of 0.5% is a turn round from last quarter when outflows were 6.7%. AUM up 9% to £13.8bn. Over 12 months the AUM is up 15%.
  • Estimates For the year ahead a reduction in revenue is expected of £22m which is the performance fees of £23.6m not expected to recur in year to March 2020.
  • Valuation PER 12.8X yield 6.4%. EV/AUM 2.7%
  • Conclusion This is a volatile youth. The shares could be very cheap if the funds perform. The UK absolute return fund has proved to be very market sensitive which may take some time to recover from.  Momentum may take time to rebuild but the shares are cheap.

10 January 2019

Polar Capital – Q3 Update  

Share Price 488p

Mkt Cap £459m

  • Update £12.7bn AUM compares to £14.7bn at 30 September. That implies net outflows of £284m in Q3 which is 2% of AUM. It is also why they haver omitted Q3 flows from this announcement I imagine.  Performance fees were strong for the year at £23m vs £15m last year.
  • Estimates Revenue estimates are for a £23m improvement in the year to Mar 19. £8m of this looks likely to come from performance fees implying an underlying c 10% revenue increase. AUm are 8% ahead of December 17 so this looks reasonable
  • Valuation EV/AUM 2.8%. PER 10.7, yield 7.2%
  • Conclusion Shares are 33% off from their highs and are now cheap. The company will recover from the net outflows so it is now in attractive territory

26 November 2018

Polar Capital – H1 Results  

Share Price 498p

Mkt Cap £469m

  • Results £27.3m PBT includes £5.5m performance fee on the one fund that has a crystallisation that is not 31 December.  The remaining funds subject to performance fees have accrued performance fees of £32.5m at 30 September which has dropped to £23.3m over October. Likewise the pre announced £14.7m AUM has decreased to £13.6bn at 30 October. Core profit was up strongly at £21.7m (+80%) which bodes well. EPS adjusted was 24.3p (2017 11.8p)
  • Estimates Look for £46.4p PBT for the year to March 19. 47% of this has been achieved in H1. With AUM down in H2 this represents headwinds but the performance fees look likely to make it up.
  • Valuation The shares trade at 10.7X PER and yield 6.7%. This is cheaper than Liontrust which trades at 13% and yields 3.9%.  EV/AUM is 3.2%. The shares are off 32% from their peak in July
  • Conclusion Polar is one to buy in bad times and sometimes it gets expensive.  Now it is cheaper than peers it looks interesting if investors are comfortable on the market risk

11 October 2018

Image result for nervous smiley

Polar Capital Business unit crystallisation 

Share Price 596p

Mkt Cap £558m

·         Crystallisation – Under the incentivisation policy of Polar fund managers can sell their economic carry in their funds to the holding company at a 25% discount to the rating of the company after they have done 3 years service in exchange for shares that they are locked into for the next 3 years. The healthcare team have elected to exercise this option which results in 3% earnings enhancement

·         Valuation EV/AUM 3.2%. PER 15.2 yield 5.3% before the 3% earnings enhancement

·         Conclusion Shares are expensive.  The healthcare team accounts for 14% of AUM and this is not positive for the medium term.

12 July 2018

Polar Capital – Trading Statement 

Share Price692p

Mkt Cap £648m

·         Statement  Net inflows over the 3 months to June were 5.8% which meant that with market tailwinds AUM was up 13.5% over the 3 months to £13.6bn.

·         Estimates AUM are up 36% year on year. Consensus revenue expectation for the year to March 19 looks for flat revenue on account of the expectation of reduced performance fees. 

·         Valuation EV/AUM is 4%. PER 18.5 and yield 4.4%

·         Conclusion  Shares are expensive but the company is on a tear. Its been a vintage quarter for the asset managers.  The call is all down to future flows. The CEO is cautious on markets. With the shares up 57% over 12 months holders could be forgiven for profit taking