Mercia Asset Management

LN: MERC

£118.8m market cap

23.9p last close

Mercia Asset Management is a regionally focused specialist asset manager. Its stated intent is to become the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m.

Investment summary

The £30.7m cash exit from Oxgene underlines management’s success in building a sustainably profitable specialist asset manager, delivering high levels of contracted revenue and providing a filtered pipeline of opportunities for Mercia’s direct investment portfolio. Based on progress to date, we believe Mercia will achieve its three-year strategic plan ahead of time (grow operating profitability, expand assets under management (AUM) to £1bn and ‘evergreen’ the balance sheet by end FY22). By the end of H121, AUM had risen to £872m (15% from FY22 target), with fee-earning funds under management (FUM) of £722m. Despite progress, Mercia’s shares continue to trade at a material 21% discount to net assets (0.79x) or a 30–35% discount when we include the third-party funds business (worth 4.9p at 3% of FUM). This is a substantial discount to its peers.

Y/E Mar
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2019A 10.7 (1.4) 3.0 1.00 27.0 N/A
2020A 12.7 0.2 (15.5) (4.55) N/A N/A
2021E N/A N/A N/A N/A N/A N/A
2022E N/A N/A N/A N/A N/A N/A
Industry outlook

Mercia’s management has set out a clear vision for the company, with the acquisition of NVM’s VCT business accelerating Mercia’s transition towards managing fee-paying third-party funds. Among the early stage tech investors, discounts to NAV have been closing and moving to premia in 2020. Transparency, growth, consistency of performance, capital preservation and investor returns are the key metrics by which to judge success.

Last updated on 26/02/2021
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Sector
TMT
Share price graph
Balance sheet
Forecast net debt (£m) N/A
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual 10.7 2.5 20.0
Relative* 8.1 (1.6) 18.3
52-week high/low 27.4p/13.8p
*% relative to local index
Key management
Dr Mark Payton CEO
Martin Glanfield CFO
Julian Viggars CIO

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