We initiate today on Brooks Macdonald. Prospects for revenue and profitability growth look encouraging as we examine a number of key factors including:
Management's ambitious organic and acquisitive growth plans.
BM is operating in a huge market with substantial medium-to-long-term tailwinds.
It has a track record of delivering superior investment returns, which is one of the most important factors used by financial advisers when selecting an investment manager.
FUM growth has been solid in recent years (12% CAGR over 4-5 years), fueled mainly by investment performance and attractive-looking acquisitions, with quarterly flows accelerating sharply over the last 18 months, and expected to contribute more to FUM growth in the future.
It is in the final stages of completing a multi-year re-engineering of operational processes and technology. Benefits are already being realised but a platform for scalability has been created, with the potential to increase profit margins as the business grows.
Funds under management (FUM) totalled £17.3bn on 31 Dec 21 and in its last full financial year (FY21 to 30 Jun 21) BM’s revenue was £118m (up 8.8% on FY20: £109m) and underlying PBT was £30.6m (up 32.5% on FY20: £23.1), which is evidence of operational leverage kicking in.
Based on its growth ambitions (reaching £26-£27bn FUM in the next 5-6 years, excluding growth from acquisitions) and the potential for further operational leverage, our fundamental DCF valuation is 3,250p per share, 49% above the current price (although this gap has widened with recent equity market falls). In addition, BM’s PER of 17.4 is 30% below the sector median of 24.7.
10 Mar 2022
Ambitious growth strategy builds on 30-year track record
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Ambitious growth strategy builds on 30-year track record
Brooks Macdonald Group plc (BRK:LON) | 1,840 0 0.0% | Mkt Cap: 302.6m
- Published:
10 Mar 2022 -
Author:
Paul Bryant -
Pages:
33
We initiate today on Brooks Macdonald. Prospects for revenue and profitability growth look encouraging as we examine a number of key factors including:
Management's ambitious organic and acquisitive growth plans.
BM is operating in a huge market with substantial medium-to-long-term tailwinds.
It has a track record of delivering superior investment returns, which is one of the most important factors used by financial advisers when selecting an investment manager.
FUM growth has been solid in recent years (12% CAGR over 4-5 years), fueled mainly by investment performance and attractive-looking acquisitions, with quarterly flows accelerating sharply over the last 18 months, and expected to contribute more to FUM growth in the future.
It is in the final stages of completing a multi-year re-engineering of operational processes and technology. Benefits are already being realised but a platform for scalability has been created, with the potential to increase profit margins as the business grows.
Funds under management (FUM) totalled £17.3bn on 31 Dec 21 and in its last full financial year (FY21 to 30 Jun 21) BM’s revenue was £118m (up 8.8% on FY20: £109m) and underlying PBT was £30.6m (up 32.5% on FY20: £23.1), which is evidence of operational leverage kicking in.
Based on its growth ambitions (reaching £26-£27bn FUM in the next 5-6 years, excluding growth from acquisitions) and the potential for further operational leverage, our fundamental DCF valuation is 3,250p per share, 49% above the current price (although this gap has widened with recent equity market falls). In addition, BM’s PER of 17.4 is 30% below the sector median of 24.7.