Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Record. We currently have 48 research reports from 3 professional analysts.
Record’s Q320 update was positive, with a 4% inflow of assets under management equivalent (AUME) and the crystallisation of a performance fee in the period. AUME flows have now been positive since Q120, totalling $4.5bn (+8%) over nine months. The performance fees in this quarter follow on from a material contribution during FY19, reflecting value added for clients. Record continues to innovate and invest to counter competitive pressure, which has contributed to broadly stable management fee rates.
Record achieved +8% growth in AUME to $65bn over Q3/20E. Favourable FX movements, further Passive inflows and a temporary inflow in the higher margin, multi-product strategy all underpinned the rise. These, combined with the delivery of the year's first performance fee of £1.8m, ahead of expectations, leads to material EPS upgrades in FY20E & FY21E.
Record has maintained its commitment to improving service levels and introducing new products to meet client needs. In H120 this included a new strategy within the currency for return area and it is extending its derivative management capabilities to asset classes outside currency. These initiatives may not affect earnings significantly in the near term but are part of a process of innovation and investment that has helped to limit fee margin erosion and provide a stronger base for future client acquisition.
Record has delivered interim results in-line with forecasts, despite not recognising high margin performance fees. The business has recovered AUME through client extensions following the outflows of H2/19A, driving management fees upward. By investing in new products, IT and client service, AUME growth should continue overcoming any long-term fee pressures. With a healthy pipeline, momentum is building.
The notable highlight of Record's Q2/20A update is the +$1.7bn net client inflow, which builds on Q1/20A's inflow of +$0.3bn. This takes AUME to $59.9bn, ahead of our year-end expectations. When combined with broadly unchanged fee rates over the quarter, we see upgrade potential should this level of AUME be maintained. We prudently keep forecasts unchanged today, noting materially stronger GBP this month, which would counter some of this upside to forecasts should it be sustained.
After three quarters with outflows in assets under management equivalent (AUME), Record reported a modest inflow in its first quarter ($0.3bn) and the number of clients also ticked up. Competitive pressures remain a feature but the group is countering this with its focus on innovation and service enhancement. The breadth of new business opportunities is encouraging. A combination of sterling weakness and mix changes has led us to revise estimates, with EPS increases of 9% and 8% for this year and next.
Record's Q1 update reports a 1.7% increase in the $ value of AUME (4.0% in £ terms) to $58.3bn, with a net client inflow of +$0.3bn and exchange rate movements of +$0.7bn. The uncertain economic backdrop and associated volatility in FX is creating a welcome backdrop for Record, with 3 new mandates added in Q1. Given flattish AUME and fee rates, we leave FY20E forecasts unchanged, which produce a yield of 7% before specials.
Record faced known headwinds in FY19 from AUME outflows and a change in mix towards mandates with lower management fees but the potential to earn performance fees. In the event the outcome was better than we expected, reflecting slightly higher than anticipated management fees and cost control. Encouragingly, performance fees offset the contraction in management fees. Prospectively, Record continues to focus on client service and product innovation and this, together with the potential for further performance fee earnings, could provide the basis for further positive surprises.
Record has delivered FY19A results marginally ahead of forecasts (£24.6m revenue, £7.5m adj PBT), reflecting higher than expected EBIT margins of 32%. Further positivity comes in the form of a special dividend taking the yield to a market leading 10%. However, we expect a weaker performance over FY20E, as the effect of previously announced outflows in both Passive and Dynamic Hedging products annualise. Despite this, the client base remains extremely sticky and longstanding in nature.
Record’s Q319 trading update showed a 6.5% decline in AUME, reflecting a combination of outflows, market weakness and foreign exchange moves. This leads to a 10% reduction in our FY20e earnings. For the current year the negative effect is more than offset by crystallisation of a further performance fee, which is a reminder of the potential for positive earnings surprises in subsequent periods, where we assume none. Following further price weakness, the valuation appears cautious.
Record’s average assets under management equivalent (AUME) were stable in the first half. Management fees were modestly lower as a result of a mix change towards lower management fee rate products, although some of these are capable of earning performance fees. Evidencing the potential to offset management fees forgone, the period saw crystallisation of a performance fee which allowed profit to increase by over 6%. For the future Record’s continued focus on new and enhanced products should help defend and increase the client base and AUME levels while performance fees could generate positive earnings surprises.
Kropz, an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana, is looking to join AIM. Offer TBC, expected late Nov Titon holdings—international manufacturer and supplier of ventilation systems and window and door hardware. No capital raise. Due 10 Dec. Mkt cap c.£22m. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected early December. Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA. Due early Dec Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is investigating the possibility of AIM admission. The Company is proposing to raise up to £2.25 million before the end of December, conditional on Admission. The Panoply parent company of a digitally native technology services group founded in 2016 with the aim of identifying and acquiring best-of-breed specialist information technology and innovation consulting businesses across Europe, is looking to join AIM. Offer TBC, expected late November 2018.
Companies: OGN AMER DCTA PCA MOS GMR KOD STVG REC
In its second-quarter update, Record reported a broadly stable figure for assets under management equivalent (AUME), but also included news of a noticeable passive hedging outflow due in Q319. While this prompts 3% and 9% reductions in our FY19 and FY20 EPS estimates, the group is seeing good opportunities to win new business and our estimates exclude both potential AUME inflows and performance fees.
Kropz PLC—an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana. Looking to join AIM, offer TBC, market cap TBC. Due Late October. Azalea Energy—oil and gas production and development company based in Louisiana, United States. Net production of 13 MMcfe/D (2,200 boepd) and total 1P proved reserves of 91 Bcfe (15.1 mmboe), 2P reserves of 111 Bcfe (18.5 mmboe) raising up to $38m, expected mkt cap over $100m. Due 29 Oct 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 late Oct 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: FPM CYAN KIBO SFE CREO ZEG DEST FIPP PCIP REC
Record is in its 35th year and underlying its longevity are expertise and service levels that have sustained a client base through changing markets. FY18 saw further investment in personnel to support customised services, while a new product offering in passive hedging has the potential to earn performance fees that we have not included in our estimates. Similarly, positive net AUME flows could allow earnings to beat our expectations.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Record. We currently have 48 research reports from 3 professional analysts.
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We believe that NSF’s response to the current pandemic is in the interests of all its stakeholders. The operational shift towards remote working helps protect its staff whilst enabling its clients to continue to access the services they need. Similarly, its decision to reduce lending and focus on its existing clients and those most in need, is the prudent thing to do. These actions, combined with the high risk-adjusted margins on its existing loan book should enable the group to generate positive cash flow, even allowing for an increase in impairment during the current period of economic uncertainty. This should leave the group in a stronger position to serve its clients and win share when the current government restrictions are lifted. As a result, of this medium-term outlook we reiterate our BUY rating.
Companies: Non-Standard Finance
Alpha has released an update today, which highlights the impacts of the recent global lockdown and extreme FX volatility on the trading and working capital of their clients. We have reduced this year’s revenue forecast by 14% and EPS by 24%. We show the Company has sufficient capital to hit these revised forecasts and importantly has a business model, capital structure, technology platform and client proposition to continue to take share and return to high-growth when economies normalise.
Companies: Alpha Fx Group
1pm has provided a trading update outlining its response to the current Covid-19 outbreak. Operations continue as usual (remotely) and the group continues to write new business, however, it has received multiple requests for repayment deferrals. The group is offering this flexibility where merited to assist credit worthy UK SMEs and has the balance sheet to absorb these lower cash collections. 1pm's own funders remain supportive to the business. Given the uncertainty over the duration of the outbreak and the impact the UK's shutdown is having on 1pm's trading, we withdraw forecasts and put our recommendation under review.
Belvoir’s FY 2019 results were strong, with adj. EPS up 13% (13.6p vs our forecast 13.0p) and strong cash generation. COVID-19 will affect property sales in FY 2020 but lettings (61% of 2019 gross profit) will be more resilient, helped by the Government’s measures to support employment and incomes. Management has reacted quickly, reducing costs and putting plans in place to support franchisees. We now forecast a ‘lost year’ in FY 2020, assuming five months of no sales activity, a significant reduction in financial services and a reduction in lettings fees, partly offset by a £1.5m cost reduction. The capital light franchise model, inherent high levels of cash generation and no final dividend for 2019 mean we forecast gross cash of £2.0m at December 2020, down from £3.6m. Belvoir is in good financial shape to weather the storm and support its franchisees before returning to normal activity. The success of the strategy was again evidenced by a strong start to 2020 prior to COVID-19.
Companies: Belvoir Lettings
Premier Miton has been the worst performing asset manager YTD, despite evidence that the benefits of its merger are coming through, and its funds are outperforming. Our mark-to-market suggests that if markets remain at current levels until financial year-end in Sep’20, the shares would only be trading on 7.1x FY21 P/E, an extreme valuation for a company with significant self-help opportunities, and an extremely strong balance sheet. Our analysis also suggests PMI will enjoy increasing net cash balances over two years, reaching c.£37m in FY20 or 34% of the current market cap. As a result, we see the current share price as an extremely attractive entry point. Our updated TP of 152p is driven by a DCF assuming flat AUM for 3 years and implies 125% upside.
Companies: Premier Miton Group
Given the substantial share price decline for Ramsdens in the last month, following clear risks to near term earnings, we revisit the group’s valuation and suggest a potential impact to earnings from the COVID-19 related lockdown. The analysis shows that Ramsdens has a solid balance sheet with a number of clear valuation supports and will be able to withstand the extreme conditions that are likely to occur over the coming months. We use an 8x multiple on FY20 earnings as a reflection of a normalised earnings base which reduces our target price to 180p from 258p. At this target price Ramsdens would trade on a FY21 P/B of 1.6x and yield 4.5%. This target price offers 114% upside and we retain BUY.
Mercia’s business update highlighted the breadth of its portfolio (c 400 companies) and the strength of its cash position – £30.4m of unrestricted balance sheet cash and £190m of investment capital in its managed funds, giving c £220m of uninvested cash. However, with lower revenues now expected in FY21, Mercia also recognises that the valuations of both the NVM VCT portfolios, whose fund management contracts were acquired in December (22% fall in average NAV), and its own portfolio have been affected by market conditions. With group results not due until July, based on a read-across from the 22% fall in the NVM portfolios, we calculate a hard NAV for Mercia of 25.0p. Added to our assumption of the value of the third-party fee-earning funds business (2–3% of a reduced FUM), this would imply an indicative value for Mercia of 30.6–33.4p. Mercia trades at a c 50% discount to our indicative value today.
Companies: Mercia Technologies
Appreciate saw trading in line with expectations until the end of February, but the closure of fulfilment locations in response to COVID-19 has seen a substantial drop in billings in the past week. Management is withdrawing its guidance, but will provide an update in the second half of April. Meanwhile, the interim dividend (£2m) will not be paid and the FY dividend will be reviewed in June (c. £4m). We see the net cash balance sheet as strong enough to weather the storm. The company’s digital first strategy will accelerate and help to mitigate the pressure on physical vouchers. We will review our estimates in April, but we think that a CY20E EV/EBIT of 3.8x on existing numbers more than reflects the downside risks.
Companies: Appreciate Group
Following the UK Government announcement on Friday, NewRiver has closed its Community pub business with immediate effect. This had been anticipated.
Companies: Newriver Reit
VinaCapital Vietnam Opportunity Fund - Strong pipeline of private equity investmentsSupermarket Income REIT - Rent reviews result in 1.3% uplift to annualised rental incomeCOVID-19 Updates - Assessing the impactInsider Buying - Management seeing buying opportunities
Companies: VINACAPITAL VIETNAM OPPORTUN
Today's news & views, plus announcements from AAL, SSE, CCH, NXT, FLTR, MGGT, PHP, RMG, BBY, RDW, DOM,WJG, GATC,
Companies: Primary Health Properties
For fighter pilots, it is a minimum requirement. But having 20/20 ‘visual acuity’ (correct term) does not necessarily mean you have perfect vision (as convention assumes); instead, it indicates sharpness and clarity of vision at a distance. It is measured by a Snellen Chart, which displays letters of progressively smaller size and whereby 20/20 means that the test subject sees the same line of letters at 20 feet that a person with normal vision sees at 20 feet (or 6 metres; but 6/6 simply didn’t catch on).
Companies: ABBY BDEV BWY BKG VTY CRN CSP CRST GLE GLV INL MCS PSN RDW SPR TW/ WJG
Best idea of the week - CLS and the Real Estate Sector
Covid-19's future impact is likely to overshadow FY19A results which delivered YoY growth, despite imposition of the tenant fee ban and the backdrop of a subdued lettings/sales market. With franchisee premises and the UK housing market now closed, FY20E trading will be materially affected and growth strategies (financial services, assisted acquisitions) are now on hold. The group will fall back on its recurring lettings revenue, streamlined cost base and debt-free balance sheet to seek profitable trading and positioning for a market rebound in FY21E. Given uncertainty as to Covid-19's duration and severity, we put our recommendation Under Review and withdraw forecasts awaiting further clarity.
Companies: Property Franchise Group