Impax looks well-placed for further growth in AUM, fee income and EPS over the next 18 months. Fund performance is underpinned by the momentum behind consumer demand for improved resource efficiency and cleaner less environmentally damaging goods and services. These sectors are also supported by ever-stricter global environmental regulations such as the recent Paris climate accord. These provide catalysts for trends which support its proprietary investment strategy. They should also enable Impax to capitalise on its distinct profile: a specialist, active asset manager (at a challenging time for generalists), and a multiple awards winning market leader with a strong track record in an increasingly important area.
We expect Impax to build on a strong FY16; AUM was up 59%, all listed equity strategies outperformed their global benchmarks, net inflows into listed equity funds were at record levels, and new client mandates were secured in key geographical markets such as North America. The valuation appears undemanding relative to that potential growth.
Impax manages and advises a fast-growing portfolio of listed and private equity real asset funds, £4.5bn aggregate assets under management (AUM) as at end September 2016 (£2.7bn: end Sep 2015). It is an active, high-conviction asset manager, whose 18- year track record demonstrates deep understanding of how changing demographics, climate, changing weather patterns, rising incomes in the developing world and increased environmental regulation alters risks and opportunities for key industries.
Investment decisions are based on proprietary and rigorous investment process, designed to take advantage of trends being driven by better resource efficiency and solutions to environmental problems. Long-term drivers remain compelling, and the group’s funds are diversified geographically and by environmental market sector.
Significant FY16 AUM growth reflects benign equity markets as a whole but encouragingly for Impax we particularly note: (a) fund outperformance vs global benchmarks and (b) net fund inflows of £0.5bn during the last financial year. Recent investment in marketing will raise its profile and support distribution within both existing and new markets. Plans to launch a third private equity fund are well advanced.
Intriguingly, these encouraging growth prospects do not appear reflected in the historical valuation of Impax shares vs other quoted specialist fund management groups. Based upon consensus forecasts, the current rating is 8.1 x EV/NOPAT (EV c 1%. of AUM) with a 3.7% yield (2015-16), covered 1.5 times. Quoted peers’ ratings are listed on page 13. On 1st December the group will release results for the year ended 30 September 2016. This will not only bring an up to date report on financial and corporate progress, but also an insight as to how the company sees its own outlook. We look forward to then refining our revenue and profit forecasts for the years ahead in more detail.