Net inflows remained positive at £492m through Q4 and a further £136m in the first week of FY21e. However, in Q4, net inflows only served to dampen the impact of falling markets (-£3.5bn). Liontrust outperformed. We mark our forecasts to the AuM update, but retain our assumptions, which results in a -6% part period impact to FY20e EPS, but more material reduction in outer years: -25% FY21e and –19% FY22e.
Companies: Liontrust Asset Management
Interim results are in line. Sustained net inflows during H1 drove AuM to new highs, overcoming headwinds. This delivered +17% adj. PBT growth. AuM momentum has continued into Q3, complemented by the Neptune acquisition which stands to make a step change contribution in H2’20 and beyond. We leave forecasts unchanged. 42% of our FY20 forecast has already been delivered in H1. A 15x FY20e PER falling to 13x FY21e is undemanding given earnings momentum and flow resilience.
Liontrust has seen another impressive quarter of net inflows, against an uncertain market backdrop of geo-political uncertainty. AuM grew by 4% with the majority of the £642m net inflow coming from the core UK Retail channel. The Neptune acquisition completed postperiod end, taking AuM to £17.4bn. We see upside as the Neptune fund range is marketed to Liontrust’s core clients. In our view, a 12x FY20e PER is undemanding for a resilient growth profile which sets it apart from peers.
Liontrust has agreed to acquire Neptune Investment Management (“Neptune”) for £40m in shares: £35m on completion with the remainder contingent on performance. This equates to an attractive 6x fwd EV/EBITDA (post-synergies) multiple and 1.7% EV/AuM. Neptune has £2.8bn AuM across 19 funds which we believe represent a complementary strategic fit to Liontrust’s existing offering, driving group AuM through £17bn. This also brings additional diversification benefits. The transaction will be 3% accretive in FY20e (6m contribution) and +9% in the first full year (FY21e). We update forecasts, assuming completion in October. We continue to believe that Liontrust’s current 14x PER is undemanding, and see further upside on continued execution.
Inflows have surged in Q1 hitting a new quarterly record at +£725m, confirming AuM at £14.1bn (+11.4% qoq). Outperformance complemented this: adding a further £717m equating to+5.7% (as %opening AuM) vs the +2.7% posted by the FTSE All-Share. We do not make any changes to our earnings forecasts, having already upgraded by 6-7% at the Finals for £14.0bn AuM as at 25/6. Trading at a 13x FY20e PER falling to 12x, we find the valuation undemanding given the strong AuM growth momentum.
Liontrust has reported in-line final results, with a notable 15% dividend beat against our forecast. The fund range has already seen a surge in flows in Q1, taking AuM to £14.0bn (+11% qoq). With only a handful of trading days remaining in Q1, we incorporate this into our AuM model which drives a 6-7% earnings upgrade. We also increase our dividend forecast by c.20%. With continuing flow momentum, impressive prospective earnings growth, and the group remaining alive to strategic hires, we think the 13x PER is an undemanding valuation.
Liontrust has seen AuM bounce back in Q4 (+13% qoq), hitting a new all time high at £12.7bn and exceeding our cautious £11.7bn forecast. Net inflows were sustained throughout the quarter, and markets provided a helpful tailwind. Net inflows totalled >£1bn in H2 against industry net outflows. This points to an in line FY19e performance for the March year end just gone. We upgrade outer years (+9% FY20e, +5% FY21e) on the annualised impact from higher AuM.
Dunelm Group (DNLM LN) Positive performance puts paid to previous problems – shares to rise | Liontrust Asset Management (LIO LN) Good flows but uncertainty prompts caution | N Brown Group (BWNG LN) Unchanged FY EPS but Product sales weak. FCF/DPS hit by more PPI | Renold (RNO LN) H1 trading in line, FY19 expectations reiterated
Companies: DNLM LIO BWNG RNO
AuM grew by 5.4% to £12.0bn in Q2 on strong flows in Economic Advantage and Sustainable strategies. The new Global Fixed Income team has developed a good foundation, raising c. £300m since launch in Q1. We have seen two consecutive positive AuM readings, but recognise recent market volatility and an uncertain political outlook. We tweak our EPS forecasts up by 2-3% on a combination of higher revenue and increased prudence on costs. Valuing Liontrust on 14x FY19e PER (unch) drives our increased 684p 12m Target Price. We retain our HOLD recommendation.
Summerway Capital investing company established to acquire companies or businesses which the directors of the Company believe have the potential for strategic, operational and performance improvement so as to create shareholder value. Offer TBC, market cap TBC expected 19 October
Admission is being sought as a result of the proposed RTO of Cambian Group plc following completion of the acquisition by CareTech a leading provider of specialist social care services, supporting adults and children with a wide range of complex needs. No raise, market cap TBC expected 19 October.
PetroTal (TAL.TO) - The exploration and production company focused on oil assets in Peru is seeking a secondary AIM quotation before the end of 2018.
Path Investments— First acquisition of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Seeking £10m raise. Due early Oct
Green Man Gaming—pure play e-commerce and technology company in the digital video games industry. revenue CAGR growth of 26.7% in the last three years to £47.5m. Due Mid October 2018. EBITDA Profitable. Offer TBA
Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months.
Companies: IMO CGNR CMCL CRC SSTY FOX ERIS VERS LIO NXR
Dunelm Group (DNLM LN) Resilient Q4 sales but heatwave means higher Sale stock (4% d/grade) | Liontrust Asset Management (LIO LN) FuM +9% in Q1, forecasts unchanged | Mobile Streams (MOS LN) Full year update | ReNeuron Group (RENE LN) In-line FY results highlight hRPC deal & upcoming Phase III start in Stroke | Xaar (XAR LN) Joint investment with Stratasys in newly formed Xaar 3D Ltd
Companies: DNLM LIO MOS RENE XAR
Liontrust previewed £11.3bn AuM at the Finals (25/6) by which point Q1 was all but done. Little more was added, resulting in £11.4bn AuM at quarter end. During Q1, both net inflows and positive performance led to 9.0% AuM growth after a flat Q4’18. Flows saw a material contribution from the launch of the Global Fixed Income funds. We do not change our forecasts at this early stage of FY19e. We increase our 12m target price to 666p (from 572p) using a 14x FY19e PER multiple and reiterate our HOLD.
Liontrust has reported FY18e earnings in line with our expectations. The dividend beat our 18.0p forecast, coming in at 21.0p – however with no fixed guidance we have been consistently conservative. AuM has recovered YTD and stands at £11.3bn (25/6) benefiting from positive markets and the launch of Global Fixed Income funds (+c.£210m). We make no changes to earnings forecasts but now drive DPS using prospective EPS growth (+11-13% upgrade). We use a 12x FY19e PER to set our 572p 12m Target Price and reiterate our HOLD until we can see evidence of stronger flows.
Leisure – Bowling Sector Two perfect strikes | Liontrust Asset Management (LIO LN) PBT in line, dividend beat, earnings forecasts unch | St Ives (SIV LN) CEO succession plan | Walker Greenbank (WGB LN) Reassuring update puts spotlight on valuation anomaly | Xaar (XAR LN) Ceramics below expectations; cost reduction plan
Companies: LIO KCT WGB XAR
We have refreshed our quality style screen for the second time and report on style performance since the last refresh in October. Performance has been very strong, outperforming the small-cap index by c.1600bps (weighted basis) and c.1000bps (unweighted). There has been volatility with the market and this style has yet to be tested in a concerted down market, but in a flat or rising market quality appears to be a successful investment style in small-caps. We have highlighted 11 focus stocks in the new screen and will report back again on performance when we next refresh the screen in about 5-6 months’ time.
Companies: LIO GHT AMO CHH ZYT DOTD GTLY RIV FCRM TAM PMI
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Equals' FY19A results confirm another year of strong, double-digit revenue and adj EBITDA growth. The move to a B2B focused offering continues to progress and looks well timed in view of Covid-19's impact on overseas travel. While the pandemic impacted Q2/20E trading early on, we note June KPI's indicate a positive rebound. Given the continued uncertainty as to Covid's full impact upon FY20E trading, we refrain from reissuing forecasts and thus leave our recommendation under review.
Companies: Equals Group
Accelerating activity in to FY21
Companies: Manolete Partners
Blackbird plc* (BIRD.L, 19.25p/£64.7m) | Mirada plc* (MIRA.L, 92.5p/£8.2m) | Tern plc* (TERN.L, 10.75p/£29.0m) | Checkit plc (CKT.L, 39.5p/£24.5m)
Companies: BIRD MIRA MIRA TERN CKT
The covid-19 pandemic has had a devastating effect on the share price of property companies, with 31% wiped off the value of their total market capitalisation during the first quarter of 2020.
Companies: AEWU CREI CSH BOOT INL HLCL THRL SUPR RESI RGL DIGS GR1T SOHO PHP BOXE ASLI UTG AGR UAI BLND UANC CAL SHED CWD WHR EPIC WKP GRI YEW HMSO PCA INTU NRR
S4 Capital has announced the merger of Lens10, a leading Australian digital strategy & analytics consultancy, with MightyHive, its data & programmatic media practice. Founded in 2010, Lens10 provides a range of data services including digital strategy, digital analytics, optimisation and tag management. It is a certified Google Partner in Google Analytics, Google Cloud & Google Marketing Platform and is an Adobe Analytics partner. It has 25 data specialists in Melbourne and Sydney, and has a blue-chip client list including CottonOn, National Rugby League, Australian Ballet and ME Bank. Data analytics continues to grow in importance as marketers accelerate their digital transformation and S4 Capital indicates it has seen explosive demand for these services. No financial information has been disclosed, though we note the group reiterates its commitment not to compromise its balance sheet, which remains net cash. Separately, the group has announced that Miles Young, previously Chairman & CEO of Ogilvy, is joining the board. He has particular expertise in creative work and talent, new technologies and Asia Pacific developed over 35yrs at Ogilvy
Companies: S4 Capital
Record delivered full year results matching expectations with assets under management equivalent (AUME) slightly ahead as positive inflows more than offset the impact of market moves and fee margins were broadly stable. The group also demonstrated its operational resilience and expertise to clients during the onset of COVID-19 and accompanying volatility. Looking ahead, the group has a fresh focus on growth and to support this is investing in a measured way in IT and its staff.
FY20 results – increased firepower to acquire
Companies: First Property Group
REACT Group plc (REACT) is exploiting a gap in the market for specialist deep cleaning services for customers in the public and private sectors, with revenues split 50/50 between reactive work and regular maintenance. The Covid-19 pandemic has led to a significant upturn in activity in certain sectors (such as healthcare and transport) but temporarily weaker demand from others (such as hospitality). While its Covid-related work is by no means its biggest revenue generator, the legacy of the pandemic is likely to have a profound impact on future levels of activity as all businesses and organisations become more aware of the importance of maintaining high standards of cleanliness and hygiene. With a new management team and strengthened balance sheet, we believe the outlook is positive, a view that has been supported by the Group’s interim results which have generated maiden profits.
Companies: React Group
Wirecard UK’s suspension by the FCA has been lifted, allowing U Account business through Shelby Holdings and Morses Club to resume as normal, permitting customers full access to cash, which was previously frozen, albeit ring-fenced in a safe Barclays UK account. Morses Club has offered its U Account customers free use of the previously affected U Account accounts in July as compensation for the issue, helping to mitigate any negative impact and ensuring the relationship with customers remains strong.
Companies: Morses Club
Red Dwarf, the very British sci-fi comedy franchise, ran for 11 seasons – most recently in 2017; and The Promised Land is a feature-length TV movie – out this year. Yes, the programme is an acquired taste. Strangely, too, many episodes are impacted by a virus or three (physiological, not main-frame).
Companies: WJG BKG CSP CRST MCS INL BDEV RDW GLE SPR TW/ PSN VTY GLV CRN ABBY BWY
Companies: AGR CSH ESP DIGS IHR LXI PHP RESI SIR SUPR THRL SOHO BBOX SHED WHR
A robust set of FY20E numbers and the absence of evidence of material bad debts increases, should reassure today and provide evidence 1pm's multi-product, sector diverse, hybrid model can deliver in tougher conditions. Given a NAV p/s of 62p (30p tangible), which now includes enhanced Covid-19 provisions, the material discount to book is clearly unwarranted.
Today's reassuring AGM statement confirms strong trading over Q1/20E and a resilient Q2/20E performance to date, despite the shutdown of the UK housing market over that period. A further +£1.3m of net cash has been produced this year which will partly be used to restart franchisee assisted acquisitions. Given current uncertainty over the economic impact of COVID-19, our recommendation remains Under Review.
Companies: Property Franchise Group
FY20 Interim results
Companies: Litigation Capital Management