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

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

The Hardman & Co Monthly: August 2023

Feature article: UK interest rates and “risk-free” gilts at their peak? Infrastructure stocks struggle Executive summary Infrastructure/Renewable Energy Funds ► The share price performances of the nine Infrastructure Investment Companies (IICs) and of the 22 Renewable Energy Infrastructure Funds (REIFs) have been dire over the past year. Undoubtedly, the sharp rise in interest rates has presented the sector with serious challenges, especially since the yield on “risk-free” 10-year gilts has r

The Hardman & Co Monthly: July 2022

This month, we feature a contribution by Stephen Isaacs, who is known in the hedge fund world for his, often, thought-provoking commentaries about markets, economics and politics. It goes without saying that the thoughts expressed in this article are those of Stephen, and do not necessarily reflect Hardman & Co’s views. Feature article: UK/OK – muddling through The past few years have seen previously unheard-of constitutional risks – from threats to the Union to the departure from the EU. Brit

The Hardman & Co Monthly: June 2023

Feature article: UK Water – making waves Over the past year, UK utility share prices have been volatile, especially within the electricity sub-sector. The combination of the war in Ukraine and the associated impact of fluctuating gas prices, along with sharply higher inflation and the consequential rise in interest rates, have destabilised much of the sector. Indeed, most sector constituents have seen their share pieces fall (although not seriously), while Centrica, the UK’s leading gas company

Hardman & Co Monthly: May 2023

Feature article: Recognising the value of Intellectual Property IP rights – always intangible, often inscrutable, but never inconsequential Intellectual Property (IP) rights protect innovation and allow companies to commercialise their endeavours. While this sounds straightforward, the challenge in raising capital to fund development has risen significantly recently as the world has responded to macro challenges and investors have become more risk averse. This has called into question the abili

Hardman & Co Research: Volta Finance Limited (VTAS): An easy guide to the benefits of CLOs

The industry-specific terminology associated with CLOs can give the impression of a complexity to the product that belies reality, and, in our view, is unhelpful to the Volta investment case. Accordingly, in this note, we give investors a simple guide to what CLOs are, the benefits they provide, and how Volta is taking the market opportunities. The core of CLOs is uncomplicated cashflows. They are just a pooling of loans into a vehicle, which funds itself by issuing a range of debt and equity. T

Hardman & Co Monthly: March 2023

Feature article: Higher interest rates overshadow IIC/REIF prospects We focus on the nine quoted infrastructure investment companies (IICs) and on the 22 renewable energy infrastructure funds (REIFs), most of which saw their share prices fall during 2022, while the FTSE 100 rose by just 0.9%. In our ‘Quoted UK Infrastructure and Renewable Energy – Prospects for 2023’ publication, we have addressed the three key issues of recent months – higher inflation, extremely volatile power prices and risin

Hardman & Co Monthly: February 2023

Feature article: Asset manager valuations Asset managers had a poor 2022: the S&P Composite 1500 Asset Management Index was down 22% and, according to the Investment Company Institute (ICI), worldwide mutual funds fell by 20%, from $76tr to $60tr. When bond and equity markets fall, the results are unlikely to be pretty: with revenues trending down and multiples contracting, there is a double whammy to contend with. So how do valuations shape up now, after a bullish start to the new year?

Volta Finance Ltd: R&A shining light on 20%+ IRR base-case scenarios

In our note, Cash is king and the king is rocking and rolling, published on 16 September 2022, we examined Volta’s success in generating cashflows at near-record levels, and looked forward, considering why defaults would rise – but not to the level then built into loan prices. We also highlighted Volta’s diversification and geographical exposure. These positive underlying features continue, and we briefly update them in this note. We also consider how investors can use the recent Report and Acco

Hardman & Co Monthly: January 2023

Feature article: Hardman & Co Healthcare Index - Review of 2022 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 53 constituents of the index are high-risk, still being in the development stage, with micro-capitalisations and a long way from sal

The Hardman & Co Monthly: November 2022

Feature article: A different kind of beat: Boyzone, 1996 Quoted company engagement with retail investors – a new world This month's feature article has been written in collaboration with The Quoted Companies Alliance. Introduction: Retail investors used to be the second-class citizens of the stock market. The bulk of their money was held in funds or pension schemes where a professional took all the decisions and where they owned only a tiny part of the equity market directly. They also tended

The Hardman & Co Monthly: October 2022

Feature article: A glass half-empty view of markets - The 20s harder than the last decade This month’s feature article is written by Steve Clapham, who gives his view on the outlook for markets. He sets out one side of the current debate in markets. Steve is admirably experienced to express an opinion. Steve is the founder of Behind the Balance Sheet, an investor training consultancy. He qualified as a chartered accountant before moving into investment banking as an analyst in the 1980s. In

Volta Finance Limited: Cash is king and the king is rocking and rolling

Volta is no different from any other investment company in that it identifies when the market has mispriced long-term cashflows. In this note, we examine its success in that current cashflows are at near-record levels and 2.7x the dividend payment. Looking forward, we review why defaults may not rise to the level now built into loan prices – a view consistent with that of rating agencies and Volta – as well as the risks to this position. We note the current level of inflation is positive, as lon

Octopus Renewables Infrastructure

ORIT: renewables diversified across stage, technology, and geography…

DSW Capital+ (DSW, House Stock at 51p) - H1 results –promising outlook

LIBERUM: PayPoint: Growth is not priced in

H1'24 results: strength of the model evident

Vanquis Banking Group+ (VANQ, House Stock at 112p) - Adding flesh to the bones

Duke Royalty - In Royal Health

Duke has released its H1/24A interim results for the period ending 30th September 2023 that are in-line with expectations. Recurring cash revenues increased 17% to £12.2m, whilst total cash revenues increased 35% to £14.1m. The portfolio continues to be resilient despite macroeconomic headwinds, and c£18m of capital was deployed across new and existing investments. We iterate a 1-year price target of 45p based on a target FCF yield of 8%.

Agronomics - A unique offering in a rapidly developing sector

Agronomics (ANIC) invests in cellular agriculture companies. Since mid-2022 it has placed increasing emphasis on companies using precision fermentation technology or providing contract precision fermentation services, as these appear to have greater near-term commercial potential than cultivated meat and seafood. Agronomics’ NAV has risen almost 100% since the inception of the current strategy in April 2019, and looks set to increase further as the company’s portfolio holdings receive regulatory

Critical Metals plc releases its Final Results

Key Points CRTM reported a loss of £2.7M for the 12 months ending 30 June 2023. Increased indirect ownership of the Molulu project from 40% to 70%, streamlining the corporate structure. Commenced copper ore production at Molulu in January 2023. In October 2023, the Company announced that it had entered into an off-take agreement with O.M Metal & Resources S.A.R.L, for a minimum of 20,000 tonnes of copper oxide ore. Raised £600,000 at a price of 25p per share and raised a further £1.3M at 25p per

LIBERUM: CPP Group: Disposal of Globiva

Hardman & Co Insight: Higher interest rates overshadow IIC/REIF prospects

Hardman & Co Research’s focus is on the nine quoted infrastructure investment companies (IICs) and on the 22 renewable energy infrastructure funds (REIFs), most of which saw their share prices fall during 2022, while the FTSE 100 rose by just 0.9%. In our Quoted UK Infrastructure and Renewable Energy – Prospects for 2023 publication, we have addressed the three key issues of recent months: higher inflation, extremely volatile power prices and rising interest rates.

The Joy of Techs - Cavendish Technology quarterly sector note

£23.3bn in enterprise value has been returned to AIM technology shareholders over the past six years in the form of 51 public to private takeouts, including 10 in 2023 alone with the takeovers of Smoove* and Tribal announced in early October. With UK valuations appearing cheap and looking more attractive to potential acquirers, we take a moment to reflect on the trends of corporate and private equity bidders targeting AIM-listed technology companies going back to 2017, through the uncertainties

Delivering growth in uncertain markets

Positive interims from Vp this morning highlight another period of growth despite the mixed market backdrop. The results again illustrate the benefit of Vp’s diverse mix of specialist activities, with the quality of earnings confirmed by further growth in operating margin (now 13.9%) and ROCE (14.7%). Strategic priorities include continued progress with ESG initiatives and a greater emphasis on Digital, with more on this likely to follow later in the year. We maintain our Fair Value estimate o

AVI Global

AGT is trading at its widest ‘double discount’ since the great financial crisis…

LIBERUM: PayPoint: Yield cross with strong EBIT growth

H1'24 results give comfort