Mercia Asset Management: EBITDA & margin up again, undervaluation rises
H1-26 (to 30 Sep 25) saw EBITDA jump 14% y-o-y to £4.2m and EBITDA margin up from 20.8% to 24.6%. Impressively, this was achieved in a muted period for portfolio activity, with revenue slightly down from £17.6m to £17.2m.AUM was marginally up at £2.0bn. Capital raises and new mandates added +£52m, offset by distributions of -£56m: mostly dividends to VCT shareholders and returns of capital by funds in their realisation phase. Valuation moves added +£16m. There were no redemptions. Mercia is benefitting from operational efficiencies, taking advantage of its increased scale compared to a few years ago.
Clearly, the portfolio is being deeply discounted by investors, yet Mercia has a proven track record of exiting at a premium to NAV. Its strategy is to sell c.70% of the portfolio over the next few years, so it won’t take long to see if the market is being grossly over-conservative. We think that it is. Our fundamental valuation equates to 58p per share, 99% above the current share price.
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.
Equity Development enables companies to become better understood and supported by investors. Since our launch in 1996 we have consistently focused on helping our clients improve their communication and relationships with both existing and potential shareholders. Our clients have come from a wide variety of sectors and domiciles, are both private and quoted and range in size from micro-cap to $multi-billions. We offer free access to company research notes written by experienced analysts. These notes include detailed forecasts, financial models and a fair value. We host regular Private Investor Forums at which investors have the opportunity to hear company directors present, and to ask questions. These are free to attend. We broadcast live Webinars with company management that include active Q&A. We also make the recordings available online. We arrange face to face meetings between private investors and company management. We are active users of Twitter, commenting daily on company news, share price moves, Directors’ Dealings, Equity Development Research Notes & Events.
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