Edison Investment Research - Mercia Asset Management (MERC) Mercia Asset Management - FY21 a breakthrough year, with more to come

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Edison Investment Research

Richard Williamson

Mercia Asset Management - FY21 a breakthrough year, with more to come

FY21 was the year Mercia’s business model as a specialist asset manager matured. The group largely achieved its FY22 strategic goals a year ahead of target (assets under management, AUM, of c £1bn, evergreen balance sheet and sustainable profitability), with NAV per share climbing 24% y-o-y to 40p and AUM rising 18% y-o-y to £940m at year end. Given this progress, a new plan has been set, Mercia 20:20, aiming for average annual growth in AUM of 20% and average PBT of £20m between FY22 and FY24. Mercia is now profitable (FY21 EPS of 7.83p, a 4.8x P/E), with an FY21 dividend yield of 1.1%. Despite evident progress, Mercia’s shares continue to trade at a discount to NAV (0.94x), even before considering the embedded value of the third-party fund management business (c 6.9p/share at 4% of AUM).

07/07/2021 8 EN

Underlying

Mercia Asset Management

Mercia Technologies is an investment group focused on the creation/identification, funding and scaling of technology businesses from the U.K. regions. Co. directly invests across four sectors: Software & the Internet, which consists of cyber security, software as a service analytical tool, Adtech and artificial intelligence; Digital & Digital Entertainment, which consists of virtual reality, augmented reality, mixed reality and serious games; Electronics, Materials & Manufacturing/Engineering, which consists of energy and communications, value electronics, and manufacturing applications; and Life Sciences & Biosciences, which consists of diagnostics, digital health and medical devices.

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GB00BSL71W47 London Stock Exchange United Kingdom

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Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

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Analysts

Richard Williamson

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Mercia Asset Management - FY21 a breakthrough year, with more to come

A rarity in the sector: Revenue +19%, EBITDA +34%

Positive trading, discount-to-NAV being addressed

A deeply undervalued specialist in private markets

Accsys Technologies - Upgrading guidance for the full year

Topps Tiles - Market outperformance again in FY24

Nabaltec - Resilience and margin expansion

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