Daily Grime - HL/PAM/POLR/MCL

Jeremy Grime | Oct 10, 2019 13:06

News

Oh dear. No happy faces today.

Nutmeg’s results have appeared at companies house which confirms there is no change in the strategy of buying AUM at uneconomic prices. The crowdfunding round in June valued the company at more than £250m.

Hargreaves Lansdown (LON:HRGV) – Trading Statement

Share Price £18.16

Market Cap £8.6bn

Conflict Disclosure: No Holding

Update 1.7% net inflows in the 3 months to September has combined with a modest market tailwind to lift AUM 2.5% to £101.8bn. Revenue of £128m is 6% up year on year. The statement says a period of elevated investment in people, marketing and technology has been validated by net new business flows
Estimates Forecasts for the year to July 2020 anticipate 11.5% revenue growth year on year which will need an acceleration from the 6% reported in Q1.
Valuation PER 31X Yield 2.5%
Conclusion The Hargreaves model is now looking tired and expensive. With net flows in line with most wealth managers and the company referring to a period of investment as the 63% operating normalises so will the rating.

Polar Capital (LON:PCT) – AUM Update

Share Price 532p

Mkt Cap £513m

Conflict Disclosure: No Holding

Update No 3 months numbers reported today immediately raises suspicion. Net outflows over 6 months were £448m. With net inflows of £150m in the quarter to June this implies net outflows of £598m in the 3 months to September, which is 4.1% of AUM. AUM is now £14.7bn. Net performance fees accrued are £4.2m, down from £32.5m the year before. The Japan team has lost a fund manager and £400m of AUM while two long standing clients have redeemed £500m from the technology and healthcare fund.
Estimates No performance fees are in forecasts but the outflows may surprise today causing perhaps some downside risk to numbers

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Valuation PER on existing forecasts 12.8X with a yield of 6.3%. EV/AUM 2.8%
Conclusion Earlier this year the shares were 450p. Given these are momentum stocks the shares could revisit that level.

Premier Asset Management (LON:PAM) – Trading Update

Share Price 176p

Mkt Cap £187m

Conflict Disclosure: No Holding

Update Net outflows in the quarter were 3.6% while AUM was down 2.7% to £6.56bn. Second quarter of outflows following 24 quarters of inflows. Merger with Miton now approved by shareholders expected to be effective 14 November.
Estimates The £18.5m PBT expectation for the current year is based on £7bn of AUM which looks a little toppy now the year has ended with AUM at £6.56bn.
Valuation Per 12.4X Yield 5.9%. EV/AUM 2.5%
Conclusion Not a great quarter but this won’t be about inflows while the company is undergoing a merger which creates 27% cost synergies. Hard to see any catalyst just now but as the synergies are delivered the shares may start looking extremely cheap.

Morses Club (LON:MCLM) – H1 Results

Share Price 115p

Mkt Cap £151m

Conflict Disclosure: I Hold

Results Loan Book growth of 6.2% to £72.2m and revenue is up 15% to £66.3m. Impairments reduced from 21.9% revenue to 19% revenue while the cost base has increased from £18.7m to £29.5m resulting in a decline in operating profit from £11.3m to £8.1m. Adjusted EPS is down 10.6% to 5.9p. Digital lending achieved £6.9m of revenue (2018 £0.3m) but lost £3.5m adjusted. Customer number were 52,000 with a loan book of £4m. Debt is £22.7m on equity of £70.3m and the company is renewing its financing which expires in August 2020.
Estimates Forecasts were anticipating a 9% increase in PBT to £21.7m this year. This will come down today. Adjusted PBT in H1 was £9.6m. H2 is traditionally stronger with the Christmas period.
Valuation Adjusted ROE is 22.6%, down from 25.6% and the shares trade at 2.1X book value. PER pre downgrades is 8.5X and yield 7.2%
Conclusion The company is undergoing a transformation which requires investment. The yield may support the shares in the short term but the market is unlikely to believe in the digital product until profits are delivered. Unlike Monzo.

Written By: Jeremy Grime

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