In line: Q3 FuM ticks up, flow dynamics unchanged

FuM grew by 2% qoq on positive performance alongside continued modest net outflows as expected. There is no material change to flow dynamics, although the headline MPS number has been held back by timing on certain mandate wins. We make no change to forecasts. We see a number of value creation opportunities, not least exposure to a compelling structural adoption trend in MPS at large. The current 12x FY24e PER is attractive given the opportunity set. We reiterate BUY and a 2370p 12m TP (16x FY24

Brooks Macdonald: Rare operating leverage, scale and financial returns, in a consolidating industry, on 11.4x calendar this year

Brooks Macdonald has many of the attributes you desire in a quoted wealth manager. It already has 750 firms using its Platform MPS, and growth there continues to be strong at 15% p.a. in H1. It has the relationships, the brand, decent investment performance, and a raft of complementary specialist products. In addition, the SS&C Technologies platform which went live in September ’22 means assets can now be added at negligible marginal cost. The company is however becalmed by the higher gross outf

Hybridan Small Cap Feast - 07 Mar 24

7th March 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: TMT Acquisition (TMTA.L) has left the Standard Segment of the London Stock Exchange. What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: Change of Market: Banquet Buffet*** Brooks Macdonald Group £16.275 £267.6m (BRK.L) Th

Limited scope for surprise, seek colour on opportunity

We see limited scope for surprise at the interims next week (7th March). Brooks released an “in line” trading update alongside Q2 FuM (17/1). Sentiment has been more benign cal’YTD which is more positive for new business heading to tax year end. We hope to see more colour on the approach to capturing a deep and rich MPS opportunity. We think that the current 11x rating is a highly attractive entry point given strong earnings growth potential from MPS adoption and margin expansion. We reiterate B

Q2 FuM +4%, positioned to deliver efficient growth

Brooks Macdonald grew FuM by 4% in Q2 with muted flows, as expected, and positive performance. Underlying, gross inflows remained strong. There are growth opportunities in MPS adoption and adding financial planning for some clients. The focus on efficiency remains strong. We make no material changes to forecasts. We reiterate BUY with a 2370p 12m TP (16x FY24e PER, from 2280p) with growth opportunities alongside scope for margin expansion.

FUM up 4.3% in quarter, profit forecast upgraded a touch

FUM rose by 4.3% in Q2-FY24 from £16.9bn on 30 Sep 23 to £17.6bn on 31 Dec 23. This is on track to meet our end-FY24 (30 Jun 24) FUM target of £18.4bn (+9% y-o-y growth). Investment performance was strong, contributing £821m to FUM or +4.9% of opening FUM. Net flows remained subdued at -£98m (Q1: -£70m). We remind readers that in Oct 23, BM announced a programme to reduce costs by around £4m per year, with one-off FY24 restructuring costs of up to £3.0m. This followed extensive technology and d

Tech investments pave way for staff cuts & margin upside

Brooks Macdonald has announced it intends to reduce staff complement by 55, around 10% of its workforce of just over 500. It expects to save £4m of costs per year from the changes, but it will incur restructuring costs of up to £3.0m, to be recognised in the current FY24. We update our forecasts and valuation as a result of these changes, primarily: - Adding ‘one-off’ restructuring charges of £3m to FY24 which reduces statutory profits but not ‘underlying’ profit. - Reducing staff costs from FY

Well-flagged sluggish quarter but price fall looks over-done

FUM increased marginally over Q1 of FY24 from £16.85bn on 30 Jun 23 to £16.86bn on 30 Sep 23. As flagged in the FY23 results release of 14th Sep 23, net flows were slightly negative for the quarter at -£70m, although BM has indicated it expects positive flows for the whole of FY24. It’s important to keep this small negative quarterly net flow number in context: it follows nine consecutive quarters of positive flows (achieved despite difficult market conditions) and a period where BM recorded a

Revenue & profit beat forecast but outlook cautious

FUM closed FY23 (30 Jun 23) on £16.8bn, 7.5% up y-o-y (30 Jun 22: £15.7bn). This was the second-highest growth rate among adviser-channel-focused wealth management peers. Net flows totalled +£817m (FY22: +£785m), investment performance added +£363m, 2.3% of opening FUM, above the benchmark MSCI PIMFA balanced index which returned 1.6%. BM has flagged a healthy pipeline for FY24, although investor sentiment is still subdued. We forecast FUM, revenue and underlying PBT growth of 10%, 2%, and 3% r

FY23 results justify recent rise in share price

FUM closed FY23 (30 Jun 23) on £16.9bn, 7.5% up y-o-y (30 Jun 22: £15.7bn) and 0.3% up over Q4 (31 Mar 23: £16.8bn). Q4’s net FUM flow of +£97m continues BM’s impressive run of positive net flows (now spanning nine consecutive quarters) during a period of difficult market conditions and investor nervousness. FY23 net flows totalled +£817m (FY22: +£785m). BM has flagged a healthy pipeline for FY24, although investor sentiment is still subdued. Andrea Montague has been appointed CFO and Executive

Impressive consistency in strength of net flows

BM has recorded yet another quarter of positive net flows: +£373m in Q3 of FY23 (to 31 Mar 23), its eighth in succession. This is a hugely impressive achievement considering the last five of these quarters was a period characterised by market falls, economic uncertainty, and investor nervousness – an environment more typically associated with depressed flows. BM’s net flows have now been above peer group median levels since calendar Q4 of 2021. Our fundamental valuation remains at 3150p per sha

Hybridan Small Cap Feast - 02 Mar 23

02 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

Forecasts up on positive outlook, dividend +8%

Brooks Macdonald (BM) recorded a solid H1-23 (to 31 Dec 22) with FUM up 4% to £16.2bn, from £15.7bn on 30 Jun 22. Net inflows totalled +£347m and investment performance +£212m (+1.4% compared to -0.3% of the benchmark MSCI PIMFA Private Investor Balanced Index). A 7th consecutive quarter of positive net flows was recorded, with impressive resilience through the 2022 bear market, pointing to very strong fundamentals when it comes to attracting and retaining client assets. In calendar-2022, BM’s

Redde

Proposed share-for-share merger with Northgate

Lowland Investment Company - Is the tide turning?

Lowland Investment Company’s (LWI’s) unconstrained, multi-cap investment policy differentiates it from most peers in the AIC UK Equity Income sector. It offers investors broad market exposure, outside of the large, traditional ‘income stocks’ at a 13% discount to NAV. The underperformance of small- and mid-cap companies versus larger peers has slowed and a turnaround would be very positive for LWI. Portfolio returns are already benefiting from acquisition activity, spurred by low valuations, and

Foxtons Group (FOXT LN) - 1Q24 IMS shows real momentum

Foxtons Group plc first quarter revenue rose 9% to £35.7m (1Q23: £32.9m) with growth delivered across all business segments. Trading is in line with management's expectations.

PCI Pal - +25% FY23 revenue growth, FY24 growth of +28% reiterated

PCI Pal’s FY23 results show revenue growth of +25% to £14.9m, gross profit growth of +31% to £13.1m at a margin of 88%, and an outlook confirming robust momentum in H1 24. The FY23 results are as expected following the August trading update, and FY23 Total Annual Contract Value (TACV) is +23% yoy to £16.4m, with ARR +14% yoy to £12.6m due to £3.1m of contracts in deployment. We expect ARR will increase +35% and +31% to £17.0m and £22.2m in FY24 and FY25, as management lands and expands following

Foresight Solar Fund - Optimising capital allocation

Foresight Solar Fund (FSFL) celebrated its 10-year anniversary of listing on the London Stock Exchange with decade-high cash distributions from assets of £120.4m in its FY23 results (year end 31 December). FY23 also saw FSFL’s divestment programme come to fruition with the sale of a 50% stake in its Spanish Lorca portfolio at a 21% premium to its holding value. The proceeds of this divestment, along with free cash, were used to pay down the fund’s variable rate debt via its revolving credit faci

Tetragon Financial Group - FY23 growth driven by idiosyncratic factors

Tetragon Financial Group (Tetragon) posted a 6.4% net asset value (NAV) per share total return (TR) in US dollar terms in FY23. Tetragon’s returns normally have a low correlation with broader markets, and therefore its FY23 performance was below the 26.3% return of the S&P 500 Index, which rallied on the artificial intelligence (AI) theme. Tetragon’s FY23 return on equity (RoE) of 5.5% was below its target of 10–15% pa. That said, its performance since listing was within the target range at 11.3

Resilient FY24, confident long-term outlook

Vp’s full year update highlights sector-leading results, once again benefiting from the diversity of its end markets and the quality of its specialist businesses. With results expected to be broadly in line with expectations, we trim our FY24 PBT forecast by c.5% to £39.0m, a shade below the FY23 outturn (£40.2m). We consider this an impressively resilient performance set against a mixed market backdrop. Under new leadership, a strategic refresh is underway and management is confident in long

Zeus Top Picks for 2024 - 2023 review and outlook for 2024

On 9 January last year, we set out our ten top stock picks for 2023, for what turned out to be another relatively poor twelve months for UK equities due to two wars, stubbornly high inflation and further tightening of monetary policy. This was even as other major markets, such as the US, largely recovered in the year. In the 2023 calendar year, the AIM All-Share index fell 8.2% and is still 42% off its 2021 high. From the release of our 2023 top picks note, the average total return (assuming div

Vector Capital - Full year results illustrate challenging backdrop; dividend maintained

Vector Capital is an established commercial lending group, focused on secured short-term and bridging loans in the property sector. This morning, the group has reported full year results to 31 December 2023, illustrating the challenging market backdrop. While underlying trading was robust, with good demand being seen for new loans, provisions for bad debts relating to historical loans of £728k in the year led to a decrease in PBT to £2.1m (WHI est. £2.4m, FY22 £2.8m). Looking ahead, although VCA

Strong H1'23 results; forecasts upgraded