AssetCo: an undervalued asset manager rising to inflexion point
Like professional sport, asset management is a 'results orientated' game – that is currently polarising between low cost, index hugging trackers at one end vs specialist active fund managers at the other.
() (Mrkcap £53.5m at 35p), led by accomplished industry veteran Martin Gilbert (Exec Chair and founder of Aberdeen Asset Mgt) falls squarely into the latter camp.
Indeed at the last count in Mar '23, its wholly owned Assets Under Management (AuM) had climbed to £3.2bn (£13.8bn incl. Parmenion’s £10.6bn) - after completing a series of acquisitions (e.g. River and Mercantile, Saracen, ReVera Capital, SVM Asset Management Limited and Ocean) since being created in Apr '21.
Growth though hasn’t just come via M&A. has also delivered robust returns with 86% of its active equity funds being rated in either the 1st or 2nd quartiles of their associated benchmarks over the past 3 years.
Elsewhere too, significant progress has been made integrating all these acquisitions under one roof (re £16m pa of savings) with substantial bench-strength now across UK, European, Indian and global equities. This is alongside owning a 30% equity interest in Parmenion, which was acquired in Oct '21 for £20.6m and has been independently valued at circa £75m-£90m, or 50p-60p/share.
Here Parmenion is one of the UK's fastest growing IFA support platforms (H1’23 EBITDA of £9.1m on £20.6m of sales – 70% owned by Preservation Capital), benefiting from high recurring revenues, leading adviser ratings, competitive pricing and proprietary technology. Interestingly over the past year, the company has also received several approaches from potential buyers.
Sure this hard work hasn’t yet been reflected in the beaten-down share price. Albeit equally for canny risk tolerant investors, the undervaluation offers opportunity, especially as AssetCo appears to have reached an inflexion point.
In fact, despite being forecast by Panmure Gordon to be marginally loss making in FY '24 (y/e Sept) - is on track to become profitable (PBT £3.2m) and cash generative in FY '25 on sales of £18.8m. Plus, augmented by a bullet proof balance sheet (Mar '23 net cash of £20.6m, or 14p/share), the Board has ample firepower to pay a 1.3p dividend (£1.85m), whist similarly executing its 'Buy & Build' and organic growth strategies.
Ok, so putting all this together, how much is worth?
Well clearly it’s impossible to say precisely due to the rapidly expanding nature of the group. However, as an indication, Panmure Gordon & Singer Capital Markets both have BUY ratings on the stock with Target Prices of 97p and 130p respectively.
Lastly, in addition to Martin Gilbert’s 4.9% holding, other notable shareholders include legendary investor Christopher Mills of Harwood Capital who owns a 13.9% stake. Nevertheless as always, please do your own research.
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