Hits: 13

16 June 2020

Tatton Asset Management–FY  Results

Share Price 295p

Mkt Cap £165m

Conflict disclosure: I Hold 

  • Results  AUM increased 9.6% to £6.65bn with net inflows of 18.6% mitigated by market declines in March. Revenue up 22% to £21.37m. Adjusted operating profit up 24% to £9.1m. a margin of 42.5%. EPS up 19.8% to 12p. DPS up 14% to 9.6p for full year. Net cash £12.8m. Number of firms up 33.7% to 595. Outlook looks forward with confidence. Tatton grew revenue 27% to £15.9m and Paradigm 9.6% to £5.4m.
  • Estimates Operating profit is in line with estimates. Going forward 22% PBT growth is forecast. While AUM are only up 10% on last year the organic flows of 18% provide some comfort.
  • Valuation PE 19.5X Yield 3.8% 
  • Conclusion This asset harvesting machine with strong margins is valued at a lower PR than Quilter. This should do good things if markets remain intact.

21 April 2020

Tatton Asset Management – Trading Update

Share Price 248p

Mkt Cap £138m

Conflict Disclosure: I Hold

 

  • Update Net inflows in H2 were 11.3% Over 12 months net inflows were 18.6%. In H2 AUM fell 4.7% to £6.651m. Paradigm also performed well with member firms up 10.9%. £12.8m net cash.

 

  • Valuation PE 19.8 Yield 3.7%

 

  • Conclusion While Integrafin has annualised inflows of c 12% and trades at 37X I keep hoping that Tatton with 18% net inflows could achieve such a valuation as Integrafin’s 37X.

8 November 2019

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Tatton Asset Management – H1 Results 

Share Price 214p

Mkt cap £119m

Conflict Disclosure: I Hold

  • Results AUM up 22.8% over 12 months to £7bn, which is 14.7% over 6 months, so accelerating inflows. Revenue up 15% to £9.73m and adjusted operating profit up 23.2% to £4.13m.  EPS up 17.9% to 5.39p. Net cash £9.2m. Tatton grew revenue 19% while delivering a 60% operating margin, and Paradigm revenue was up 7% delivering a 35% operating margin. The outlook refers to improved efficiencies and trading is said to be in line.
  • Estimates Full year estimates to March 2020 anticipate £9.7m PBT, of which 43% has been delivered in H1.
  • Valuation PER 16.9X, yield 4.5%. The investment platform is a scalable platform making 60% operating margin, which with the very high ROE potential should be highly ratable. If we (possibly heroically) said that Paradigm pays for the central costs that leaves Tatton IM valued at 13.9X the run rate profits at the current market cap.
  • Conclusion  I like this one. I feel the market has focussed on the Paradigm business and so overlooks the modest valuation placed on the Tatton IM business. That value should come out over time.

17 October 2019

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Tatton Asset Management – Trading Update 

Share Price 210p

Mkt cap £117m

Conflict Disclosure: I Hold

  • Update Net inflows over 6 months to September were 7.2% of AUM bringing AUM to £7bn. Paradigm Mortgages increased the number of firms 5.3% to 1,466. Paradigm consulting member felt slightly to 385 (March 19 390).  Results due 11 November and trading said to be “in line with expectations”.
  • Estimates £9.7m PBT looks like consensus which compares to £7.4m last year, an increase of 25%
  • Valuation PER 16.3X Yield 4.7%
  • Conclusion The statement refers to the Tenet relationship making pleasing progress which provides a strong pipeline. Not often can we buy 25% growth at 16X

3 June 2019

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Tatton Asset Management – FY Results 

Share Price 199p

Mkt Cap £111m

Conflict disclosure – I hold

  • Update AUM up 24.5% to £6.1bn. Revenue up 12.9% to £17.5m and adjusted operating profit up 12.3% to £7.3m representing a 41% operating margin.  EPS up 10% to 10p and a full year dividend of 8.4p. Net cash £12.2m.  Member firms up 30% to 445 and two investment mandates won with Tanat and Frenkel Topping. 50% revenue is from asset management, 34% from consulting and 16% from mortgage broking. Outlook is positive.
  • Estimates Forecasts anticipated £17.2m revenue and £7.5m PBT so this is in line. The 16 April trading update anticipated results “within the range” which has caused some recent share price weakness.
  • Valuation.Forecasts anticipate 23% EPS growth putting the shares on a PER of 16X with a yield of 4.3%.
  • Conclusion  Tenet turned over £168m in the year to September 2017 according to companies house of which £114m came from the investment network so one has to speculate this has the ability to accelerate Tatton’s AUM growth materially as well as Frenkel Topping mandate helping. The 43% ROE indicates a competitive advantage which is largely in the asset management business. If they can grow quickly enough their scale will provide a sustainable advantage. At 16X the shares look good value.

16 April 2019

Tatton Asset Management – Trading Update 

Share Price 231p

Mkt Cap £129m

Disclosure I hold

  • Update AUM is up 25% over 12 months to £6.1bn. Over 6 months from September the AUM is up 7%.  Paradigm mortgages increased its member firms by 14% to 1393.  But fee pressure in the consulting business results in no growth there.
  • Estimates Zeus forecast £7.8m PBT from £17.5m revenue for the year to March 2019. This is based on average AUM of £5.5bn which looks to be in line with expectations while a modest reduction from £9.1m revenue to £8.8m was expected in mortgages and consulting which looks reasonable.
  • Valuation Current PER 19 Yield 3.5%
  • Conclusion  The growth driver is likely to be the asset management business which currently accounts for c. half the revenue.  This growth story is in tact. I would like to understand why the fee pressure for the consulting business is not apparent at Simplybiz but it is for Tatton.  No catalyst to move the shares onwards today but the law of small numbers should mean that this will produce a good return from the growth in asset management.

18 October 2018

Tatton Asset Management – Trading Statement 

Share Price 267p

Mkt Cap £149m

·         Statement AUM is up 16.3% over 6 months to £5.7bn. Moprtgage services continued its growth rate with 1,290 members (March 18 –  1,219). IFA support business increased member firms to 382 (March 18 – 368). Outlook is confident and “in line”

·         Estimates Revenue is expected to grow 14% to £17.7m in the year to March 2019 which deliveres 20% PBT growth to £7.8m. The driver of growth is the asset management business which is highly scalable.  Last year asset management accounted for 48% of the revenue but growing its AUM at an annualised 33% growth rate at the moment makes a 14% revenue growth target for the business as a whole look somewhat unchallenging

·         Valuation PER to March 2019 is 23.6 falling to 20X March 20 with a 3% dividend yield

·         Conclusion The high growth rate and scalability of the AUM platform makes this potentially a large company. Early buyers will be well rewarded

 

28 June 2018

Tatton Asset Management – Meeting  

Share Price 233p

Mkt Cap £130m

·         Meeting Just occasionally you see a company and come away blown away with a vision of the future.  This company has a cost advantage just as St James Place did in the early days. It is profitable and early stage with a scalable model.   

·         The answer to acquisitions was unconvincing and I felt sure they had been advised to have an acquisition strategy to justify the £10m cash on the balance sheet. My suspicion is the compliance services will get sold off in a few years time as it becomes too small and lacks scalability as the core asset management business gains scale. 

·         Average portfolio size is £100k and I found at last the robo asset manager that is scalable.  The PER of 20 and yield of 3.4% is surprisingly low for a robo with the scalability and momentum of this company.  I believe we will see this company move to the main market and enter the FTSE 250 in a few years time.

·         Conclusion As I found myself wanting to short the wealth managers I found myself puzzled as to why on earth Brewin with its growing £150m cash pile hasn’t acquired this business rather that organically attempting to grow their own more expensive version.

 

5 December 2017

Tatton Asset Management – H1 Results  

Share Price189p

Mkt Cap £106m

·         Results AUM up 15% over 6 months while PBt decreased to £0.5m after exceptional IPo costs of £1.6m.

·         Estimates Revenue forecasts are for 20% revenue growth for the year to March 2018 which looks conservative

·         Valuation PER is 20.3 and yield 3.4%. 2 years ago that would have been expensive. It isn’t today.

·         Conclusion  I think this is a really good quality situation. It possible I will forgive them for declining to meet. But highly unlikely.