money-2724241

Duke Royalty

LN: DUKE

£111.4m market cap

46.5p last close

Duke Royalty is a financial services company providing royalty-based finance to small and growing businesses in selected sectors and with specific criteria. The royalty payments are either for a fixed term (typically 30 years) or perpetual.

Investment summary

Royalty investing is a profitable and significant form of alternative finance in North America. However, it is still a nascent industry in Europe and Duke Royalty was set up in 2015 by an experienced team to change this. Its current portfolio is now close to £80m and it aims to add £45–100m in deals a year in the coming years. Duke has just announced a fund-raising of up to £20m, of which £16.1m has already been placed in an institutional offering at 44p per share. This will allow it to invest another £45m in the next 12 months. We estimate a sustainable ROE of 14% for Duke and we see the current fair value range at 50–58p per share.

Y/E Mar
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2018A 1.8 N/A 0.2 0.4 116.3 183.2
2019A 6.1 N/A 3.1 1.8 25.8 22.6
2020E 12.1 N/A 6.2 2.8 16.6 13.4
2021E 18.7 N/A 10.2 3.7 12.6 9.8
Industry outlook

Although royalty finance has grown from its mining and pharmaceutical industry roots to become a US$50bn sector in North America, it is still a new asset class in Europe. Duke is the market leader in the UK in what is an open field for growth. Royalty finance provides flexible, long-term finance while allowing the business owners to retain control and reducing repayment risks by extending amortisations beyond the first three to five years. For investors like Duke, it provides an attractive yield, with potential for growth and a scalable business model.

Last updated on 14/11/2019
Share price graph
Balance sheet
Forecast net debt (£m) N/A
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual 5.2 3.6 7.7
Relative* 4.0 0.7 3.5
52-week high/low 48.8p/40.0p
*% relative to local index
Key management
Neil Johnson CEO
Charlie Cannon-Brookes Director