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Tatton delivered solid interim results for the 6 months period ending 30 September 2020, showing double-digit growth on most key metrics, despite very challenging market conditions. It also announced that it has secured a £30m credit facility to pursue organic and acquisitive growth. That, in addition to its accumulated net cash pile of £13.3m, is a significant ‘war chest’. In today’s uncertain and volatile economic environment, finding reasonably valued or even under-priced opportunities to deploy some of this capital is a realistic expectation.
Companies: Tatton Asset Management Plc
Tatton has demonstrated resilience to deliver a strong outturn. H1 performance was in line – delivering half our FY21 estimates – on sustained net inflows (£55m pcm) as performance benefited from market recovery and Paradigm addressed lower mortgage volumes by refocusing on refi/product switching. AuM has recently hit the £8bn milestone. The balance sheet is well capitalised (£13m cash) and pursuit of compelling organic (and acquisitive) opportunity continues. The 18x fwd PER reflects this, alongside 20% forecast EPS growth.
What’s new: Interim results confirm the growth set out in the recent trading update: 12.6% rise in Group Revenues to £11.0m (1H last year: £9.7m); 21.9% rise in adj operating profit to £5.03m (1H last year: £4.13m); 17.4% rise over 6 months in AUM to £7.8bn on 30 September 2020, n.b. From 31 March 2020 the WMA balanced index rose 11.6% to 4510; Market movements added 12.5% to AUM (i.e. Tatton outperformed WMA); 1H net inflows of £328.1bn were 4.9% of opening AUM (i.e. c 10% annualised net inflows);
Tatton has reported an in-line H1 financial performance: revenue totalled £11.0m (vs N+1Se £10.9m) and £5.0m adj. EBIT (50% N+1S FY21e). AuM grew by 3.4% to £7.8bn as net inflows continued throughout H1 (+£328m) – a positive performance given the backdrop. Paradigm, particularly in Mortgages, has been resilient post-lockdown. Having delivered 50% of our earnings forecast for FY21e, there is potential for upside. However, we leave our forecasts unchanged and a margin for safety as we remain alive to potential external risks/volatility.
The most pleasing aspect of Tatton’s trading update for the six months ending 30 Sep 2020 (H1 2021) was how robust its fundamental offering to clients (financial advisers) has proven to be in highly uncertain market conditions. It continued to attract strong net inflows into its asset management business while also growing its base of IFA consulting and mortgage services clients. The prospect of beating our previous FY21 forecasts looks promising. Longerterm growth prospects also look strong. We do, however, remain wary of the potential impact of further large market dips. For now, we maintain our fundamental valuation of 300p per share but see room for significant upside on that mark if Tatton continues to deliver.
What’s new: Today’s trading update reveals 17% rise in assets under management (AuM), double digit revenue growth, and an increasing operating margin as the business scales. The outlook is positive. Highlights are: 12.6% rise in 1H Group Revenues to £11.0m (1H last year: £9.7m); 21.9% rise in 1H adj operating profit to £5.0m (1H last year: £4.1m); 17.4% rise over 6 months in AUM to £7.8bn on 30 September 2020, n.b. From 31 March 2020 the WMA balanced index rose 11.6% to 4510; - Market movements added 12.5% to AUM (i.e. Tatton outperformed WMA); - 1H net inflows of £328.1bn were 4.9% of opening AUM (i.e. c 10% annualised net inflows); 3.0% rise in Paradigm Mortgage Services member firms to 1,591 2.5% rise in Paradigm Consulting member firms Interims will be announced on Wednesday, 18 November 2020
Tatton passed the March 2020 market-crash stress-test with flying colours. Financial advisers continued to trust it with their clients’ money – net fund inflows were £86m in March (just under the FY20 average of £94m pm) – at a time when many funds saw record outflows. Over FY20 Tatton recorded £1.1bn of inflows, and despite the market bottom nearly coinciding with the 31-Mar year-end, AUM closed 10% above FY19 on £6.7bn. Revenue grew 22% to £21.4m; adjusted operating profit was up 24% to £9.1m; PAT jumped 72% from £4.9m to £8.4m; and full-year dividend increased 14% from 8.4p to 9.6p, a yield of 3.3%. Tatton remains debt-free with £12.8m of net cash.
Final results to March are in line. COVID has disrupted progress but AuM has recovered to £7.6bn in recent weeks, having finished the year at £6.7bn. We note that Tatton has maintained net inflows and has continued to develop adviser membership – both are drivers of long-term value creation. We model the recent AuM recovery, sustained flows and a gradual recovery in mortgage lending. This results in a 10% reduction to our pre-COVID earnings forecasts. The opportunity remains compelling.
What’s new: Group, “Tatton”, results for the year to 31 March 2020, were as indicated by its 21 April update: “in line with analysts’ forecasts”. Highlights are: 22% rise in revenues to £21.4m (or £20.2m ex current year VAT refund) - 27% rise in Tatton division revenue to £15.9m - 10% rise in Paradigm division (Mortgage Services & Consultancy) to £5.5m £1.13bn of net inflows for the 12 months, which is 18.6% of opening AUM - Average net inflows £94m a month - IFA firms using Tatton increased 34% to 595 firms On 31 March 2020 AUM was £6.65bn (9.6% rise over the year) - On 21 February 2020 the AUM reached £7.76bn - From 21 February to 31 March WMA balanced index fell 12% to 3872 - Market movements (including March 2020) reduced AUM by £0.7bn
Tatton Asset Management continued to attract new client assets through the recent market turmoil: a notable achievement at a time when many investors flocked to cash and fled equity and even some bond funds at the fastest pace in decades1 .
AuM was on track for a very strong finish to FY20e with net inflows sustained (H2 avg £114m pcm) and AuM peaking at £7.8bn in late February – well on the way to landmark £8bn AuM. COVID intervened and market performance impacted AuM, reducing to £6.7bn at year end. Paradigm saw continued growth in membership. FY20e earnings are expected to be in line nonetheless, with Tatton having delivered a third consecutive year of earnings growth following IPO in 2017. There are a number of moving parts as a result of COVID-related disruption as we look forward 12m. In light of a wide range of potential outcomes, we withdraw our forecasts for the moment and hope to reinstate them in the near future when there is greater clarity around the trading environment.
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In addition to highlighting the relatively attractive underlying conditions that prevailed in February, in this note we introduce our FY23 estimates. We believe that the latter helps to further highlight the attractive valuation and growth potential offered by the group, as well as the significant valuation discount that Plus500 trades on relative to its peers. We see the latter as inappropriate given the clear benefits of the group’s best-in-class platform, its scalable technology and agile marketing algorithms. We expect these factors to drive continued market share gains and superior financial returns, and as a result, we reiterate our BUY rating.
Companies: Plus500 Ltd.
Mercia has validated the model emphatically with the sale of Oxgene, the second-largest portfolio investment, for £30.7m. This is nearly double the carrying value and a £14.6m realised gain, equating to a 5x return/51% IRR. 3rd party funds also benefited. This underscores embedded value, prudent carrying values and the “Complete Connected Capital” model. An accompanying update points to strong underlying performance which drives a 56% FY21e adj. EBITDA upgrade and +13-15% in outer years. The shares trade at an unwarranted ~30% discount to our revised NAV (+12%) and a ~40% discount to our SOTP intrinsic value.
Companies: Mercia Asset Management PLC
tinyBuild— a leading video games publisher and developer with global operations. tinyBuild's strategic focus is in creating longlasting IP by partnering with video games developers, establishing a stable platform on which to build multi-game and multimedia franchises is to join AIM. Offer details TBC. Due mid-March. AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7m by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. Cellular Goods a UK-based provider of premium consumer products based on biosynthetic cannabinoids announced its intention to join the main market (standard). Has raised £13M in an oversubscribed placing. £25m mkt cap. Due 26 Feb. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Team PLC announced their plans for an AIM IPO. Team owns Theta Enhanced Asset Management Ltd, trading as Team Asset Management. This is a Jersey-based active fund manager providing discretionary and advisory portfolio management services to private clients, trusts and charities. Assets under management were GBP291m in November, up from GBP140m in December 2019 . The Company is seeking to raise no less than £5m. The Placing will be priced on a pre-money valuation for the Company of £7m. Targeting March Admission. Virgin Wines UK Plc has out their plans for an AIM IPO. Virgin Wines is a direct-to-consumer online wine retailer that sells products to retail customers in the UK through two subscription schemes and a pay-as-you-go offering. The Group also sells a range of beers and spirits and operates a B2B sales channel for corporates. Anticipated mkt cap £110m. Raising £13m in new money and vendor sale of £34.9m . Due 2nd March. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance. According to media reports, Deliveroo, are expecting to release their IPO plans on 8th March. The company raised more than $180m in January with a valuation of more than $7bn.
Companies: YEW IKA UPR WYN ENW BWNG TRAK DBOX HZM G4M
Regional REIT’s (RGL’s) Q420 DPS, in line with the company’s previous guidance, takes the aggregate FY20 DPS to 6.4p, and is supported by continuing strong rent collection. The company has previously indicated that it was targeting dividends to be fully covered by EPRA earnings and we expect this to be confirmed when detailed FY20 results are released on 25 March.
Companies: Regional REIT Ltd.
Today's news & views, plus announcements from MRW, BNZL, HICL, AGK, SEPL, SEIT, SDY, BGO, SHED
Companies: BGO SEIT SEPL
UK railway privatisation, which was launched in the mid-1990s, has finally turned full circle: the Department of Transport has recently confirmed that its controversial railway franchise system will be scrapped. In this month's feature article, Nigel Hawkins, the Infrastructure analyst at Hardman & Co, examines the 25-year history of railway privatisation and chronicles its ups and its downs. The successes of railway privatisation, such as new rolling stock, are addressed, along with the many shortcomings, which included minimal vertical integration. With the winding up of the franchise system, the UK railway sector is effectively reverting to its former status as a nationalised industry, a shift started with the renationalisation of the collapsed Railtrack – later re-badged as Network Rail – in 2001.
Companies: ARBB BBGI CLIG DNL FLTA ICGT OCI PCA PIN PXC RECI SCE TRX SHED VTA YEW
Proposed move to AIM from the main market (standard) by Emmerson (EML.L) to provide Emmerson with access to a market and environment which is more suited, in the Board's view, to the Company's current size and strategy ahead of pivotal period for the Company with the commencement of mine construction at the Khemisset Potash Project expected by end of 2021. Follows recent award of Mining Licence granting Emmerson exclusive right to develop and mine the potash deposit and £5.5m raise to fund ongoing project development work. Subject to EGM on 21st March. Rogue Baron plc have announced its application for admission to the AQSE growth market. Rogue Baron owns five subsidiaries, namely: Shinju Spirits, Inc., Shinju Whiskey LLC, Mazeray Corporation, STI Signature Spirits Group LLC and Legacy Retail Group LLC. The Company’s goal is to build each of its brands that makes them a buyout target. Deal size TBC an expected admission date 12th March 2021. Global review platform, Trustpilot has announced its intention to float on the premium list of the LSE. Trustpilot provides an open platform, which creates a place where businesses and consumers can gain actionable insights and collaborate. Consumers are able to share feedback, at any time, about any business with a website and review feedback left by other consumers. Total revenues were US$64.3 million, US$81.9 million and US$102.0 million for the years ended 31 December 2018, 2019 and 2020, respectively. The Offer would comprise new Shares to be issued by the Company (raising gross proceeds of approximately US$50 million to support Trustpilot's growth plans and repay indebtedness) and an offer of existing Shares to be sold by certain existing shareholders, directors and employees. Timing TBC. In The Style, the e-commerce womenswear fashion brand with an influencer collaboration model, announces their intention to float on AIM. In The Style is a pure-play e-commerce fashion brand with a l customer base of women predominantly aged between 16 and 35. Founded in 2013, the group has delivered £35.4 million net sales and £3.6 million Adjusted EBITDA in the nine months to 31 December 2020, with sales up 159% from £13.7 million for the nine months to 31 December 2019. Admission is expected to take place on or around 17 March 2021. Deal size TBC. Media reports video game firm, Catalis is mulling a London IPO, just over a year after being bought by a private equity firm. Catalis’s accounts are reportedly expected to show revenues increasing to £60m in 2020, up from £43m, with adjusted earnings of £15m. Deal details and timing TBC. tinyBuild— a leading video games publisher and developer with global operations. tinyBuild's strategic focus is in creating longlasting IP by partnering with video games developers, establishing a stable platform on which to build multi-game and multimedia franchises is to join AIM. Offer details TBC. Due mid-March. AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7m by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Team PLC announced their plans for an AIM IPO. Team owns Theta Enhanced Asset Management Ltd, trading as Team Asset Management. This is a Jersey-based active fund manager providing discretionary and advisory portfolio management services to private clients, trusts and charities. Assets under management were GBP291m in November, up from GBP140m in December 2019 . The Company is seeking to raise no less than £5m. The Placing will be priced on a pre-money valuation for the Company of £7m. Targeting March Admission. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance. According to media reports, Deliveroo is expecting to release its IPO plans on 8th March. The company raised more than $180m in January with a valuation of more than $7bn.
Companies: LND GDR GAMA SOLI SHED RLE CRU WRES SBI MNO
tinyBuild— a leading video games publisher and developer with global operations. tinyBuild's strategic focus is in creating longlasting IP by partnering with video games developers, establishing a stable platform on which to build multi-game and multimedia franchises is to join AIM. Offer details TBC. Due mid-March. AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7m by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Team PLC announced their plans for an AIM IPO. Team owns Theta Enhanced Asset Management Ltd, trading as Team Asset Management. This is a Jersey-based active fund manager providing discretionary and advisory portfolio management services to private clients, trusts and charities. Assets under management were GBP291m in November, up from GBP140m in December 2019 . The Company is seeking to raise no less than £5m. The Placing will be priced on a pre-money valuation for the Company of £7m. Targeting March Admission. Virgin Wines UK Plc has out their plans for an AIM IPO. Virgin Wines is a direct-to-consumer online wine retailer that sells products to retail customers in the UK through two subscription schemes and a pay-as-you-go offering. The Group also sells a range of beers and spirits and operates a B2B sales channel for corporates. Anticipated mkt cap £110m. Raising £13m in new money and vendor sale of £34.9m . Due 2nd March. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance. According to media reports, Deliveroo, are expecting to release their IPO plans on 8th March. The company raised more than $180m in January with a valuation of more than $7bn.
Companies: ARS ESC AQX ARTL KRS KBT GRP BOOM CNS ANIC
The £30.7m cash exit from Oxgene underlines management’s success in building a sustainably profitable specialist asset manager, delivering high levels of contracted revenue and providing a filtered pipeline of opportunities for Mercia’s direct investment portfolio. Based on progress to date, we believe Mercia will achieve its three-year strategic plan ahead of time (grow operating profitability, expand assets under management (AUM) to £1bn and ‘evergreen’ the balance sheet by end FY22). By the end of H121, AUM had risen to £872m (15% from FY22 target), with fee-earning funds under management (FUM) of £722m. Despite progress, Mercia’s shares continue to trade at a material 21% discount to net assets (0.79x) or a 30–35% discount when we include the third-party funds business (worth 4.9p at 3% of FUM). This is a substantial discount to its peers.
NESF has acquired a 100MWp portfolio of new assets with a private PPA with AB InBev. This follows the private PPA agreed with Anglian Water and shows that NESF can secure deals with strong counterparties. We see private PPAs as a key opportunity to growth the asset base along with projects outwith the UK and energy storage opportunities.
Companies: Nextenergy Solar Fund
Exscientia has completed a $100m Series C financing, and Frontier IP has released a FY’21 trading update stating it remains “confident on the prospects” for FY’21 (June Y/E). Whilst, the pre-money valuation is undisclosed, Exscientia remains Frontier IP’s largest equity holding by value. Despite pressure for exits, the news clearly justifies Frontier IP’s strategy to maintain its holding in Exscientia, which has only been modestly diluted to 2.11% (from 2.27%). Fair value of Frontier IP’s portfolio last stood at £19.4m 30 June 2020, and today’s update is supportive of continued portfolio growth. We expect to see partial visibility of the financial impact of the fundraise, as with other recent fundraises PulsiV and Elute Intelligence, at interim results expected 24 March 2021. The Group currently trades on a NAV/share multiple of 1.2x. We think this multiple has room to expand with continued industry involvement, external funding and possible exit events. Shares continue to look compelling at this level.
Companies: Frontier IP Group Plc
SDLT Extension should support further sales at HQ
Companies: Palace Capital plc
Avation is a lessor of 46 commercial aircraft to a diversified airline client base. This morning, the group has released interim results for the 6-months to 31 December 2020, which illustrate the challenges faced by its customer base and the wider airline industry as a result of Covid-19, alongside the successful corrective actions taken by management. An aircraft impairment of $46.7m and expected credit loss on receivables and accrued income of $12.9m have been taken, with the NAV at period end stood at $2.38/174p per share. Whilst having scope to change given the uncertainty of the current backdrop, following these results and the maturity extension of its $342.6m senior notes earlier this month, we reinstate estimates this morning, forecasting a return to profitability in FY 2023E. With the shares now trading at a 30% discount to NAV and the extension secured, we see Avation as a key play on the pandemic recovery.
Companies: Avation PLC
Today's news & views, plus announcements from SMDS, PSN, POLY, RIO, BIFF, SONG, HSX, PAGE, RLE, SHED
Companies: PSN RLE RIO
Urban Logistics REIT (“ULR”) has converted further pipeline with five new development assets across two sites in the Midlands secured for £23m GDC at 6.12% yield. Completion is not expected until late 2022/early 2023. This follows the acquisition of a distribution asset in Droitwich earlier this week (1/3) for £5.4m. This prompts no change to forecasts as we expect all capital to be deployed by Mar-21 year end. ULR trades at an attractive 3% discount to NAV with a 6% dividend yield – both FY22e, the first full year with all capital deployed.
Companies: Urban Logistics REIT plc
