Currency in GBP
Last close As at 02/02/2023
GBP7.55
▲ −2.00 (−0.26%)
Market capitalisation
GBP287m
Research: Financials
As a specialist alternative asset manager with a focus on sustainable investment strategies and c 85% of AUM in real assets and private equity, Gresham House is well-positioned to weather current market conditions. The H122 trading update supports this and indicates that it continues to make progress towards its five-year plan (GH25) objectives.
Gresham House |
Good progress in H122 |
H122 update |
Financial services |
14 July 2022 |
Share price performance
Business description
Next events
Analyst
Gresham House is a research client of Edison Investment Research Limited |
As a specialist alternative asset manager with a focus on sustainable investment strategies and c 85% of AUM in real assets and private equity, Gresham House is well-positioned to weather current market conditions. The H122 trading update supports this and indicates that it continues to make progress towards its five-year plan (GH25) objectives.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
|||||||
12/21 |
70.4 |
20.2 |
49.3 |
10.0 |
16.4 |
1.2 |
|||||||
12/22e |
74.2 |
25.9 |
52.1 |
13.5 |
15.5 |
1.7 |
|||||||
12/23e |
84.4 |
30.8 |
58.6 |
17.0 |
13.8 |
2.1 |
|||||||
12/24e |
95.3 |
36.8 |
67.1 |
24.0 |
12.1 |
3.0 |
Note: *PBT and EPS (diluted) are adjusted, excluding performance fees, realised gains, amortisation and depreciation, exceptional items and share-based payments related to acquisitions.
Strong AUM growth of 11% to £7.3bn
Fund-raising in H122 proved stronger than might be expected given an uncertain market background. Assets under management (AUM) growth was £0.8bn (11%) to £7.3bn. This included organic growth of £0.5bn (+8%) within which £150m was raised for Gresham House Energy Storage Fund (GRID), £65m for Gresham House Residential Secure Income LP (ReSI LP), £70m for Baronsmead and Mobeus VCTs and net inflows of £70m for open-ended equity funds. The acquisition of Burlington Real Estate, an Irish commercial property asset management and development company, was completed in March adding c £0.3bn to AUM. Looking ahead, the group indicates that it has its strongest client pipeline since the launch of GH25 in 2020 and that GRID intends to expand internationally to capture further battery storage investment opportunities.
Profit and margin at least meeting expectations
Gresham House expects to achieve adjusted operating profit and margins at least in line with market expectations for H122 and FY22. Reflecting this we maintain our estimates ahead of the H122 results in September, with adjusted operating profit of £25.9m for FY22e (£20.2m FY21) and an operating margin of 36% (33%). (See our May initiation note for discussion of our estimates.)
Valuation
Our comparison table (see Exhibit 1) shows Gresham House trading between European and North American peer averages on P/E multiples, but noticeably lower in terms of EV/EBITDA. Share price weakness and unchanged DCF model assumptions mean that the current price now implies a discount rate of 20% (previously 17%), underlining the cautious valuation applied by the market, assuming our estimates are met.
Valuation
In the two exhibits below we have updated our peer-comparison table and a summary chart showing implied valuation ranges for Gresham House shares. In the last three months the shares (down 18%) have shown similar weakness to the averages for European and North American peers, and for other UK quoted asset managers (down between 16% and 20%). As Exhibit 1 shows, in terms of P/E multiples, Gresham House continues to trade between the European and North American peer averages (at 15.5x FY22 and 13.8x FY23) but above more conventional UK listed asset managers. Looking at peer EV/EBITDA multiples, Gresham House trades at a markedly lower level (10.3x FY22) than the European/North American peers (but well above the traditional UK asset manager average).
Exhibit 1: Asset management comparators
Price |
Market cap (£m) |
P/E 2022e |
P/E 2023e |
Dividend yield (%) |
EV/EBITDA 2022e (x) |
|
Gresham House |
810 |
306 |
15.5 |
13.8 |
1.2 |
10.3 |
Antin Infrastructure Partners |
23 |
3,457 |
41.7 |
23.4 |
0.3 |
25.9 |
Bridgepoint |
216 |
1,779 |
17.0 |
12.3 |
N/A |
13.7 |
EQT |
20 |
16,918 |
26.2 |
16.2 |
1.4 |
22.2 |
Foresight |
386 |
418 |
15.1 |
12.1 |
N/A |
10.6 |
Impax Asset Management |
567 |
752 |
14.3 |
13.8 |
3.6 |
10.5 |
Intermediate Capital |
1,366 |
3,968 |
10.8 |
10.6 |
5.6 |
16.9 |
Partners |
75,182 |
20,014 |
21.0 |
18.3 |
3.8 |
17.9 |
Petershill Partners |
221 |
2,536 |
9.7 |
8.2 |
N/A |
N/A |
Tikehau Capital |
1,773 |
3,098 |
17.4 |
12.2 |
2.9 |
15.6 |
Average |
19.3 |
14.1 |
2.9 |
16.7 |
||
North American peer average* |
14.6 |
12.7 |
2.1 |
22.4 |
||
UK asset managers average** |
10.0 |
9.9 |
8.0 |
5.2 |
Source: Refinitiv, Edison Investment Research. Note: Priced at 14 July 2022. *Ares, Brookfield, Carlyle, Hamilton Lane, KKR, StepStone. **Ashmore, City of London, Jupiter, Liontrust, Man Group, Polar Capital, Schroders.
Exhibit 2 shows the range of values implied when we put Gresham House shares on peer group multiples for 2022e, those implied by transactions involving comparator companies and finally the range indicated by our discounted cash flow (DCF) model, assuming a 3% long-term growth rate and discount rates between 8% and 17%.
Exhibit 2: Valuation ranges based on peers, transactions and DCF |
Source: Edison Investment Research, Refinitiv. Note: Peer multiples for 2022e. The markers show average values and, for the DCF valuation, the value at a discount rate of 10%. |
Exhibit 3: Financial summary
December (£'000s unless indicated) |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
PROFIT & LOSS |
|||||||
Asset management income |
13,717 |
31,427 |
40,304 |
62,162 |
72,669 |
82,880 |
93,769 |
Dividend, interest and other income |
781 |
357 |
1,632 |
2,038 |
1,500 |
1,500 |
1,500 |
Performance fees |
0 |
1,944 |
0 |
6,163 |
0 |
0 |
0 |
Total income |
14,498 |
33,728 |
41,936 |
70,363 |
74,169 |
84,380 |
95,269 |
Administrative overheads |
(14,608) |
(34,331) |
(42,052) |
(60,116) |
(64,482) |
(68,864) |
(73,291) |
Net operating profit/(loss) before exceptional items |
(110) |
(603) |
(116) |
10,247 |
9,687 |
15,516 |
21,978 |
Finance costs |
(42) |
(390) |
(25) |
(311) |
(200) |
(200) |
(200) |
Exceptional items |
(2,001) |
(1,063) |
(1,775) |
(3,215) |
0 |
0 |
0 |
Share of associates’ profits/(losses) |
1,718 |
246 |
158 |
4,955 |
200 |
200 |
200 |
Gains and losses on investments held at fair value |
(271) |
3,048 |
4,599 |
5,842 |
0 |
0 |
0 |
Movement in fair value of contingent consideration |
(209) |
(2,065) |
(1,163) |
(1,659) |
0 |
0 |
0 |
Other |
40 |
0 |
224 |
461 |
0 |
0 |
0 |
Operating profit/(loss) before taxation |
(875) |
(827) |
1,902 |
16,320 |
9,687 |
15,516 |
21,978 |
Taxation |
218 |
(23) |
(1,084) |
(4,107) |
(1,937) |
(3,662) |
(5,495) |
Discontinued operations and FX movements |
11 |
55 |
(12) |
(172) |
0 |
0 |
0 |
Total comprehensive income |
(646) |
(795) |
806 |
12,041 |
7,749 |
11,853 |
16,484 |
Non-controlling interest |
(53) |
(55) |
(229) |
(264) |
(250) |
(250) |
(250) |
Net income attributable to equity holders |
(699) |
(850) |
577 |
11,777 |
7,499 |
11,603 |
16,234 |
Adjusted core operating profit |
|||||||
Net core income |
14,709 |
31,724 |
40,774 |
61,609 |
72,124 |
82,041 |
92,618 |
Operating expenses (excl. dep'n and amortisation) |
(11,705) |
(21,047) |
(28,690) |
(41,128) |
(45,984) |
(51,078) |
(55,571) |
EBITDA (adjusted) |
3,004 |
10,677 |
12,084 |
20,481 |
26,140 |
30,963 |
37,047 |
Finance costs |
(42) |
(390) |
(25) |
(311) |
(200) |
(200) |
(200) |
Adjusted operating profit/(loss) |
2,962 |
10,287 |
12,059 |
20,170 |
25,940 |
30,763 |
36,847 |
EPS - diluted (p) |
(3.9) |
(3.2) |
1.8 |
32.6 |
18.7 |
28.9 |
39.4 |
Adjusted, diluted EPS |
14.7 |
31.2 |
32.9 |
49.3 |
52.1 |
58.6 |
67.1 |
Dividend per share (p) |
3.0 |
4.5 |
6.0 |
10.0 |
13.5 |
17.0 |
24.0 |
BALANCE SHEET |
|||||||
Non-current assets |
83,353 |
78,165 |
80,339 |
126,143 |
101,753 |
88,381 |
75,400 |
Intangible assets |
65,911 |
58,545 |
59,970 |
95,012 |
83,099 |
70,186 |
57,273 |
Tangible fixed assets |
332 |
813 |
1,090 |
2,927 |
1,290 |
671 |
444 |
Investments |
17,032 |
18,807 |
18,228 |
25,515 |
14,675 |
14,835 |
14,995 |
Other |
78 |
0 |
1,051 |
2,689 |
2,689 |
2,689 |
2,689 |
Current Assets |
21,703 |
46,187 |
46,767 |
94,174 |
120,234 |
138,847 |
160,773 |
Trade receivables |
2,628 |
5,334 |
3,184 |
11,135 |
11,135 |
11,135 |
11,135 |
Cash and cash equivalents |
13,958 |
19,432 |
21,886 |
40,252 |
66,312 |
84,925 |
106,851 |
Assets held for sale (property then battery storage projects) |
0 |
12,188 |
7,363 |
17,545 |
17,545 |
17,545 |
17,545 |
Other |
5,117 |
9,233 |
14,334 |
25,242 |
25,242 |
25,242 |
25,242 |
Current liabilities |
6,085 |
24,928 |
20,852 |
50,220 |
44,120 |
44,120 |
44,120 |
Trade and other payables |
4,085 |
15,210 |
18,780 |
42,721 |
36,621 |
36,621 |
36,621 |
Liabilities of disposal group held for sale |
2,000 |
9,718 |
2,072 |
7,499 |
7,499 |
7,499 |
7,499 |
Non-current liabilities |
19,231 |
8,605 |
8,976 |
22,560 |
22,560 |
17,260 |
12,360 |
Long-term borrowings |
7,840 |
5,973 |
5,749 |
0 |
0 |
0 |
0 |
Other creditors |
11,391 |
2,632 |
3,227 |
22,560 |
22,560 |
17,260 |
12,360 |
Net Assets |
79,740 |
90,819 |
97,278 |
147,537 |
155,307 |
165,848 |
179,693 |
Minority interests |
527 |
582 |
811 |
1,075 |
1,325 |
1,575 |
1,825 |
Net assets attributable to ordinary shareholders |
79,213 |
90,237 |
96,467 |
146,462 |
153,982 |
164,273 |
177,868 |
Diluted NAV per share (p) |
289.3 |
288.2 |
287.4 |
366.6 |
385.5 |
411.2 |
445.3 |
ROCE (%) |
20.6 |
14.6 |
16.0 |
34.1 |
17.7 |
19.9 |
22.3 |
CASH FLOW |
|||||||
Net operating cash flow |
905 |
9,203 |
15,711 |
19,975 |
26,762 |
29,861 |
34,113 |
Acquisitions and deferred consideration |
(11,855) |
0 |
(17,887) |
(1,736) |
(7,100) |
(5,300) |
(4,900) |
Purchase of management contracts |
(23,000) |
0 |
0 |
0 |
0 |
0 |
0 |
Net sale/(purchase) of investments |
(3,906) |
(797) |
2,025 |
(1,122) |
(800) |
0 |
0 |
Net proceeds of sale of investment properties |
4,685 |
0 |
0 |
0 |
0 |
0 |
0 |
Net investment in DevCo projects |
0 |
(1,510) |
4,406 |
(8,247) |
0 |
0 |
0 |
Net purchase of fixed and intangible assets |
(242) |
(531) |
(736) |
(1,045) |
(863) |
(875) |
(888) |
Other |
(1,768) |
53 |
186 |
2,514 |
11,840 |
40 |
40 |
Cash flow from investing activities |
(36,086) |
(2,785) |
(12,006) |
(9,636) |
3,077 |
(6,135) |
(5,748) |
Dividends |
0 |
(795) |
(1,351) |
(1,881) |
(3,780) |
(5,112) |
(6,438) |
Share issuance (net) |
25,679 |
6,487 |
7,663 |
20,487 |
0 |
0 |
0 |
Share warrants issued/exercised |
3,841 |
4,859 |
182 |
0 |
0 |
0 |
0 |
Share-based payments settled |
0 |
(833) |
(7,125) |
(9,734) |
0 |
0 |
0 |
Other financing activities |
1,994 |
(8,795) |
(396) |
4,904 |
0 |
0 |
0 |
Cash flow from financing activities |
31,514 |
923 |
(1,027) |
13,776 |
(3,780) |
(5,112) |
(6,438) |
Increase/(decrease) in net cash |
(3,667) |
7,341 |
2,678 |
24,115 |
26,060 |
18,613 |
21,926 |
Closing net cash/(debt) |
6,118 |
13,459 |
16,137 |
40,252 |
66,312 |
84,925 |
106,851 |
Source: company reports, Edison Investment Research. Note: *Return on capital employed (ROCE) = adjusted operating profit + net performance fees + net development gains divided by opening net assets adjusted for share issuance during the year.
|
|
Research: Healthcare
IRLAB Therapeutics, alongside partner Ipsen, has announced an expansion of the Phase IIb/III study of mesdopetam in patients with levodopa-induced dyskinesias (LIDs) and Parkinson’s disease (PD). The companies will expand enrolment to 154 patients (from 140) supported by the addition of new sites across the US, Europe and Israel. Management has confirmed that enrolment has progressed through the study period and is expected to complete over the summer, with top-line results expected in Q422. The company also communicated that blinded safety data from the study so far are in alignment with previously reported Phase Ib/IIa results; however, it has not reported any specific details. Considering the disruption the COVID-19 pandemic has caused to patient enrolment in many trials, we see the Phase IIb/III enrolment expansion, along with the safety data announcement, as an encouraging sign for the mesdopetam development programme. We value IRLAB at SEK6.13bn or SEK118.5/share.
Get access to the very latest content matched to your personal investment style.