Environmental trends drive proposition
​Impax is a market leading manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally.
The shares have performed well since our initiation note (28 Nov) on the back of good results, a successful first close for its latest private equity fund, and AUM rising further to £4.9bn
Results for FY to Sept 2016 showed significant growth in AUM, strong fund performance and inflows from new and existing clients / geographical markets. It reported 59% y o-y growth in AUM to £4.5bn in the year. That will generate parallel increases in fee income revenue and an inherently scalable, operationally geared business model push up EPS and net cash.
Growth in AUM incorporated record £496m net inflows reflecting strong growth in its North American business and expansion of product offerings for UK clients. The outlook is supported by an ‘encouraging’ mandate pipeline. Revenue was £21.1m (FY15: £19.7m), with a £23.7m full year run rate by the year-end, reflecting H2 AUM growth. Pre-tax profit 2% up y-o-y at £5.2m reflected prior year one-offs, relatively faster growth in operating earnings to £4.2m (FY15: £3.1m) illustrates operational gearing and scalability. The 2.1p/share full year dividend (final 1.6p/share, up 33%) is comfortably covered by 3.62p EPS (FY15: 3.13p).
One might expect Impax’s strong positioning and strategy support arguments for a premium rating, but on our new forecasts the rating is currently below sector peers at 9.0x FY16/17 EV/NOPAT and 0.92% EV/AUM, backed by a prospective yield of over 5%. The group has a stated commitment to progressive dividends and considerable alignment of the interests of employees and external shareholders.
Impax Asset Management Group is an investment firm, providing listed and private equity strategies primarily to institutional clients. As of Sep 30 2017, Co. has total assets under management and advice of £7.30 billion.
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