Edison Investment Research - Mercia Asset Management (MERC) Mercia Asset Management - The UK’s top regional investor

Report

Edison Investment Research

Richard Williamson

Mercia Asset Management - The UK’s top regional investor

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.

02/03/2021 19 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.

See profile

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.

See profile

Analysts

Richard Williamson

Other Reports on these Companies

Equity Development

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

H1-25 (to 30 Sep 24) saw further progress of the Mercia 27 strategy which targets £3bn AUM (FUM + proprietary capital) and c.£10m EBITDA by FY27. AUM was up 26% y-o-y and 1% over H1-25, following a series of large mandate wins in late FY24. Mercia is one of very few London-listed asset managers with positive net flows over recent periods. H1 revenue was up 19% y-o-y and EBITDA +34%, a margin of 20.8%, up from 18.4% in H1-24. This is likely to ratchet up over the longer term as the business scales. PBT increased 75% and basic EPS increased 37%. Our valuation is sum-of-the-parts based coming...

9h / 16m 9h / 16m 1 EN

Equity Development

Positive trading, discount-to-NAV being addressed

In its AGM statement of 26 Sep 24, Mercia has confirmed that trading has been positive to date in FY25 (1 Apr 24 – 31 Mar 25), it is encouraged by current deal pipelines, and it is “optimistic for continuing profitable progress” in H2. We remind readers that Mercia is scaling rapidly, with FUM more than doubling over two years to >£1.6bn. This was boosted by record net inflows in FY24 of >£0.5bn, including a string of new mandates from British Business Bank. Mercia has also confirmed a net cash position of over £43m (30% of its market cap), a few days before the end of H1-25. With no debt, it...

September 30, 2024 September 30, 2024 1 EN

Equity Development

A deeply undervalued specialist in private markets

Mercia is one of the largest investors in ‘regional’ (ex-London) UK growth businesses. Its primary focus is managing funds of around £1.6bn for third parties (FUM) in structures such as Venture Capital Trusts, EIS funds and funds for institutional investors. The business is scaling. FUM has more than doubled in two years. Record net flows exceeded £0.5bn in FY24. And growth is by far the highest among a London-listed peer group. FY24 revenue grew 18% y-o-y to £30.4m, EBITDA 7% to £5.5m, a margin of 18.2%, likely to ratchet up over the longer term as the business scales further. Indeed, the ne...

July 2, 2024 July 2, 2024 1 EN

Accsys Technologies - Upgrading guidance for the full year

Accsys Technologies had a strong H125 with a return to revenue growth and gross margin exceeding its target of 30%. Adjusted EBITDA improved on the back of better than expected volume growth from the plant in Arnhem. The company has simplified and de-risked the group through the successful start-up of the plant in the United States and the decision to discontinue the project in Hull. After the good start of the year, Accsys increased guidance for the full year, with underlying profitability expected to improve in H2 as Accoya USA continues to ramp up.

6h / 12m 6h / 12m 1 EN

Kate Heseltine

Kate Heseltine

Topps Tiles - Market outperformance again in FY24

Topps Tiles (TPT) has reported a good profit outturn for FY24, ahead of our prior expectations, which is encouraging in the context of the challenging external environment. Management believes the overall revenue decline of 5% means TPT has once again outperformed the market that it estimates to have declined by 10–15%. TPT has made good early progress on the key growth areas under its recently announced Mission 365 strategy, which are expected to drive the bulk of the growth in the medium term. With respect to the outlook for FY25, TPT has returned to positive revenue growth in the first eigh...

7h / 32m 7h / 32m 1 EN

Toby Thorrington

Toby Thorrington

Nabaltec - Resilience and margin expansion

Nabaltec recorded revenue growth across the group of 1.5% y-o-y to €158.2m at 9M24, with sales volumes increasing 7.9% y-o-y despite selling prices falling. Functional Fillers revenue grew by 3.8% y-o-y to €114.1m due to strong demand for its viscosity optimised and fine precipitated aluminium hydroxides. Speciality Alumina revenue, however, decreased 4.1% y-o-y, partially offsetting group revenue growth due to a lack of impetus for reactive alumina in the wider market. Group EBIT grew 28.2% y-o-y to €16.8m (10.3% margin), due to higher capacity utilisation and lower costs of materials, energy...

November 25, 2024 November 25, 2024 1 EN

Sign-up for free to access full reports immediately

Email Address*

Choose Password* ( 6 or more characters )

Due to regulatory restrictions regarding the distribution of financial research, this report is restricted to a specific region or investor type. Get access to exclusive reports by answering the questions below.

Select your country*

Get financial insights straight to your inbox

By clicking "register" you accept the Terms and Conditions & Privacy Policy

Already on ResearchPool?

Almost there...

Are you a professional investor?

Select your country

REGISTER

Create a free ResearchPool account to access full reports, get a personalised dashboard and follow providers or companies

In order to access this report please create an account.

LOGIN

Mercia Asset Management - The UK’s top regional investor

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

Create a free ResearchPool account to access full reports, get a personalised dashboard and follow providers or companies

Sign-up for free to access full reports immediately

ResearchPool Subscriptions

Get the most out of your insights

Why subscribe?

How to subscribe

ResearchPool Subscriptions

This report is only available to subscribers

Why subscribe?

How to subscribe