Edison Investment Research - Mercia Asset Management (MERC) Mercia Asset Management - Scaling, sustainable and evergreen by FY22

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Edison Investment Research

Richard Williamson

Mercia Asset Management - Scaling, sustainable and evergreen by FY22

Merciaâ€™s FY20 results reflect continued progress, delivering on managementâ€™s three-year strategy. AUM climbed 58% to Â£0.8bn, while FUM rose 73% to Â£658m. Following the acquisition of the NVM VCT fund management business, the company is operationally profitable on a monthly basis, with annual revenues exceeding operating costs for the first time in FY20. Net assets rose 12% to Â£141.5m, with the direct investment portfolio stalled at Â£87.5m reflecting the impact of COVID-19 fair value adjustments and a Â£15.7m net investment. The group remains well-placed for a downturn with Â£30m of unrestricted balance sheet cash and Â£320m of group cash. Post period end the group exited The Native Antigen Company, with Â£5.2m in cash (8.4x return, 65% IRR) expected. Despite the groupâ€™s progress, Merciaâ€™s shares continue to trade at a material discount to NAV (0.60x), even before considering the embedded value of the third-party fund management business (> 4.5p at 3% of AUM).

20/07/2020 11 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

Provider

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 - Scaling, sustainable and evergreen by FY22

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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