The Hardman & Co Monthly: May 2024

Feature article: Is silver the cheapest asset on the planet? Silver is a precious metal, a monetary metal and an industrial metal with a surprisingly wide range of uses. It’s not that well understood by investors and tends to get overshadowed by gold – but, perhaps, not for much longer. We think that the provocative title of this article is justified by silver’s attractive fundamentals. The “official figures” from the Silver Institute estimate that the silver market has been in deficit for the

Arbuthnot Banking Group+ (ARBB, House Stock at 1,065p) - Profitability to normalise in FY24F

Arbuthnot Banking Group (ARBB): 2023 - delivering strategy with strong profit growth

The saying goes, the proof of the pudding is in the eating. ABG’s 2023 results proved that the strategic positioning of the group, as a relationship bank, has created enormous value. Key highlights were i) PBT £47.1m (2022: £20.0m), ii) operating income £178.9m (2022: £137.4m), iii) average net margin 5.7% (2022: 5.1%), iv) EPS +103% to 222.8p, v) total dividend for the year of 46p (2022: 42p), vi) net assets of £252.4m (2022: £212.0m), NAV per share of 1,547p (2022: 1,411p), vii) CET1 ratio of

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

Arbuthnot Banking Group+ (ARBB, House Stock at 1,065p) - FY23A results: further RoE improvement

The Hardman & Co Monthly: March 2024

Feature article: Streamed content takes over…after the Great Correction of 2022 Streaming is a disruptive, content-led, subscription-based technology. Challenging all video distribution business models, it opens up global opportunities for a growing variety of content, including gaming and sport. The Great Correction of 2022 saw the share prices of streamers plunge after market leader Netflix reported slowing subscriber growth. The slowdown in growth of subscribers led investors to refocus on

Arbuthnot Banking Group+ (ARBB, House Stock at 1055p) - In line trading update

The Hardman & Co Monthly: February 2024

Feature article: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy - Consolidation is the new mantra. The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and t

The Hardman & Co Monthly: January 2024

The main function of the HHI is to monitor the performance, and to highlight the attractiveness, of life sciences investments over the long term, and to try to identify those stocks that have disruptive technologies that consistently allow them to outperform both the index and the markets. Many of the 52 constituents of the index are high-risk, still being in the development stage, with micro-capitalisations and a long way from profitability. Despite this, some companies can still make extremely

The Hardman & Co Monthly: November 2023

This month's feature article is entitled 'Gold and a Chinese Credit Event'. A Western phenomenon? If you own, or are considering owning, gold or gold equities, it’s likely that you’re concerned about protecting your wealth, or the performance of your fund, in the expectation of some kind of financial instability. Maybe your confidence in policymakers is ebbing, or you’ve researched debt bubbles in history and concluded that physical gold and silver have been the safest places to be invested whe

Arbuthnot Banking Group (ARBB) Trading update: taking ABG to the next level

In our view, the key takeaway from the recent 3Q trading statement is how ABG is progressing strategically towards its “Future State 2” plan. In particular, we note i) specialist SME finance divisions generating the ambitious balance sheet growth in the plan, ii) optimising the core relationship banking franchise, which, in this period, saw 7% deposit growth ‒ given the level of base rates, this is a profitable product for a relationship bank, and iii) continued investment, which, at times, requ

Hybridan Small Cap Feast 19-10-2023

19th October 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 obje

Arbuthnot Banking Group+ (ARBB, House Stock at 928p) - Q3 trading update, steady as she goes

The Hardman & Co Monthly: October 2023

Feature article: Liquidity – shrinking when it’s most needed A review of liquidity in London since 2016 Summary ► Liquidity is the lifeblood of equity markets. ► Following the events at the Woodford Equity Income Fund (WEIF) in 2019, professional investors, increasingly, focus on liquidity when making investment decisions. ► However, this paper shows that liquidity declined significantly between 2016 and 2022. Our work demonstrates that, in 2016, the total value traded of trading companies lis

The Hardman & Co Monthly: September 2023

Feature article: Equity Income – UK or Global? Should investors widen their horizons? Introduction: ► The UK Equity Income sector (UKEI) is the fourth-largest investment company (IC) sector in the Association of Investment Companies’ (AIC) universe, with £12.5bn of assets (as at August 2023), and is the traditional home for investors looking for income in the equity market. ► The UKEI not only provides investors with a better dividend yield than the ge

Molten Ventures - Forward Partners deal completed

Molten Ventures has recently completed the acquisition of Forward Partners, which allowed Molten to further broaden its portfolio, add a complementary strategy focused on earlier stage companies and potentially provide a pipeline of new core holdings. Furthermore, its recent equity raise gave Molten the funds to pursue new investments in what it currently considers a buyer’s market, with an emphasis on the venture capital (VC) secondary market. In FY24 (to end-March 2024), Molten’s gross portfol

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Morning Note – 3 May 2024

Hargreaves Lansdown: Consensus estimates are too low, but HL is not significantly undervalued unless material cost savings can be realised.

Hargreaves Lansdown is the St James’s Place of retail investment platforms. It has scale and brand, which have enduring value, but, in our view, just the wrong price structure, which it cannot address without killing its own profitability. In current corporate form we see a low single-digit growth business, in the middle of a major technology upgrade, which looks cheap prima facie, given the 11x next year multiple and the 5.4% prospective yield, but which DCF valuation suggests is not. We are mi

LIBERUM: DF Capital: Strong momentum carrying into FY 24

Hybridan Research 19/03/2024 - TMT Investments: 2023 final results - 64% of portfolio in established growth companies

TMT Investments today announced its audited results for the year ended 31 December 2023. The profit for the year was US$6.4m (2022: loss of US$81m) and the NAV was US$208.1m, up 3.3% (US$201.7m as of 31 December 2022), mainly as a result of the upward revaluation of Backblaze and Collectly. This translates to NAV per share of US$6.62 (compared to US$6.41 as at 31 December 2022) and the five-year IRR (internal rate of return) is 16% p.a. As of 18 March 2023, TMT had US$11.0m in net cash and cash

UK REITs: Building back better

UK commercial property has been a cornerstone asset for many income-seeking investors (both retail and institutional) in recent decades, particularly since the global financial crisis of 2007/8 and the resulting ultra-low interest rate environment. However, since rates began to rise in 2022 to tackle surging inflation, meaningful returns have once more become available on lower-risk assets such as cash and government bonds, which has led to a retrenchment from alternative income assets such as p

REMA - Zoning in on Zonal Pricing

Zonal pricing is now under consideration for implementation in the GB power market. While this is very much not a given, this note summarises the key reports on its potential impacts. We find that while there is an overall reduction in revenues across generation, this may be less than originally predicted and new regional price differences and timing differences may favour storage in Scotland and delay new gas plant construction nationally. We think this later second order impact improves the en

Morning Note – 2 May 2024

Temple Bar – Foundations for success

We are now more than three years into the tenure of Ian Lance and Nick Purves as managers of the Temple Bar Investment Trust. In that time, the Redwheel team has aimed to establish a well-diversified portfolio of value-orientated holdings, which it says is positioned for a long-overdue reversion to more normal market conditions, after a decade of what the managers believe was exceptional economic policy and quantitative easing. They say that slowing growth and stubborn inflation in the UK have w

Avation - Exercise of ATR 72 purchase rights underpins long-term growth strategy

Avation is a lessor of 34 commercial aircraft to a diversified client base of 16 airlines. This morning, the group has provided an update on its aircraft purchasing strategy, reporting the exercise of purchase rights for 10 ATR 72 aircraft for delivery between Q4 2025 to Q1 2028, which will follow the delivery of two new ATR 72 aircraft in the coming months already on order. In addition, AVAP has been granted new purchase rights and extended its remaining rights for 24 further ATR 72 aircraft, w

LIBERUM: Investment Platforms: Initial thoughts on the Dear CEO letter

Hardman & Co Healthcare Index: 2023 – Capital demands dent performance

The Hardman & Co Healthcare Index (HHI) has been running since 2009. Its main function is to highlight the attractions of life sciences investments over the long term. For the second year running, apart from global economic influences affecting world markets, performance in 2023 was dented by the capital-intensive nature of the sector. The HHI fell 3.7%, to 483.8, underperforming the main London markets – FTSE 100 (+3.8%) and FTSE All-Share (3.8%) but outperforming the FTSE AIM All-Share Index (

NextEnergy Solar Fund – High- and growing-income opportunity?

NextEnergy Solar Fund (NESF) is almost 10 years old. Since launch, it has built a £1.2bn, 933MW portfolio of 100 operating solar assets, powering the equivalent of over 330,000 homes, declared dividends totalling £333m, and avoided the emission of about 2.2 Mt CO2e. NESF is on track to pay 8.35p in dividends, with forecast dividend cover of about 1.3x. Share price weakness that has afflicted the whole sector means that dividend translates to a yield of 11.1%, one of the highest in its sector, a

Q3: flows deteriorated but negated by performance

AuM grew by a modest 0.6% qoq to £27.8bn (SCMe £27.8bn) with £1.7bn net outflows and £1.8bn positive performance. October saw most of the redemptions, with the injection of performance in Nov-Dec having no impact on flows. Although AuM is in line with our estimate, we adopt greater caution given persisting redemptions assuming outflows continue for longer. This drives a 10% reduction in outer year estimates (FY24e unch), though the 72p dividend remains covered. At 8x FY25e PER, with a 12% yield,