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RNS today, senior staff getting a few quid while they can
At last an AIM stock I have made some money on!
Just a shame another innovative company leaves the stage to private equity and the USA to boot.Especially one involved in naturing eco friendly concepts.
Pretty much zero chance this won't go through so there's an easy 4-5% if you buy now. Plenty of selling this morning for those wanting their money now at a slight discount.
I think I'll wait it out and take the whole 1105 unless it gets closer in the meantime, which I think it will.
Personally I think it's an ok bid but not a star one. Closer to 1200 would have been fair.
Pleased i took the plunge last week
No reaction to the bid for the company this morning, is everyone still sleeping.
Surprised the sp is not at the bid price.
Wasn't expecting such a big jump in the divi. Great company to be in.
Decent set of results, also
UK Infrastructure Bank will invest £75 million on a match funding basis into the Gresham House Secure Income Renewable Energy & Storage LP (SIRES) alongside a £65 million investment from Centrica.
https://www.centrica.com/media-centre/news/2023/uk-infrastructure-bank-and-centrica-announce-significant-investment-into-sustainable-electricity-funds/
Should be about time for a re-rate.
Nice one!
Bit thin on prospects for this year me thinks.
But still worth some re rating.
Could it be they are working from home.
Another company having to announce a revised date for results because accountants haven’t finished the job.
Such statements would in the past be interpreted as bad news for shareholders as suspicion of bad stuff being unearthed by accounting firm audit.
Now it seems it’s because they misjudge the time it takes to get audited and signed off.
Considering the fees paid to those outfits and the very limited choice of who you chose to get audited by I think we need the professional bodies to look at censoring firms that don’t deliver what they say and some financial journalists to research the number of times it’s happening.
Simon Thompson of Investors Chronicle has published an update following the Trading Update issued a few days ago.
It's a fairly short article basically rehashing the details issued by the company.
He reiterates his buy recommendation and concludes the article:
"Adjust for cash and Gresham's shares are trading on forward price/earnings (PE) ratios of 14 (2022) and 12 (2023), low ratings for an investment manager with infrastructure funds that are beneficiaries of the high inflationary, low growth economic environment. Prospects for a 30 per cent hike in the annual dividend per share to 13p adds to the attraction. Buy."
Having had a quiet weekend, I've had another look at my holding of Gresham House
I've used the following information:
Gresham House annual report 15/3/22
Proactive Investors interview of Tony Dalwood 15/3/22
Gresham House Energy Storage annual report 6/4/22
Gresham House Business update 12/4/22
The interview of Tony Dalwood was fairly bland, however, there were two takeaways for me:
Analysts are forecasting 20% growth per annum for the next few years and he's "comfortable" with this.
Companies in the same line of business are generally valued at 15 to 30 times EBITDA.
Looking through the annual report, I can't find a figure for EBITDA but "Adjusted operating profit, performance fees and development project gains net of costs" seems to be a good proxy. The value of this is given as £23.657 million.
Applying this to the current market capitalisation of £380 million gives a multiple of 16, just inside Mr Dalwood's 15-30 range.
Gresham reported cash and cash equivalents of £40.25 million in the annual report. In simple terms, this doesn't earn anything for the company. It's around 10% of market cap. If this were to be successfully invested and achieve a return similar to the rest of the group then it would increase EBITDA from 23.657 to 26 million.
If we now apply 20% growth, the EBITDA figure increases to 31 million.
And give this a multiple of 20 (chosen to be an increase on the current 16 and still at the modest end of the range) we get a market capitalisation of £624 million. With 38 million shares in issue, this would give a per share value of £16.43.
The questions to ask regarding the figure I've produced are:
Is the EBITDA proxy I've used reasonable?
Can Gresham invest £40 million successfully?
Is growth of 20% likely/reasonable?
Is using 20x EBITDA reasonable?
I'm almost certain that the share price of Gresham House won't be £16.43 in twelve months time. I do however think that there's a strong case to support a considerable increase in share price from the current £9.95.
I bought a few more during the week at 1003p and will look to pick up more on any weakness.
The update I've referred to was published online. It didn't make it into the printed magazine on Friday 22/4/22.
I expect it'll be in next week's mag .
Simon Thompson of Investors Chronicle has published a further article regarding Gresham House.
The article repeats the details of several recent fundraises and provides some broker forecasts.
Cash adjusted PE for 2022 14.8
Cash adjusted PE for 2023 12.8
Pre tax profit for 2022 +30% to £26.3 million
Assets under management to reach £7.5 billion this year.
He concludes the article by raising his target price from 1100p to 1200p.
So there we have it: final results published this morning.
As anticipated, the final figures show considerable improvement from last year.
Assets under management £6.5 billion +65%
Operating profit £20.2 million +67%
Adjusted EPS 49.4p +50%
Dividend 10p +67%
Cash & liquid assets £78.3 million +73%
All in all a very good performance. They've also rejigged their 2025 targets to increase ROCE and profit margins.
They've also set a target to pay a dividend of 33% of operating profit by 2025.
There's also been a further RNS outlining a relatively small purchase in Eire. Interestingly, the vendors are using some of their cash proceeds to subscribe for Gresham shares at what looks like a 10% premium to yesterday's close.
During the day I've kept my eyes open for any broker upgrades and I've spotted one from Cannacord Genuity. I don't have access to the document but can see that they've set a target of 1418p.
And last but not least, Simon Thompson from Investors Chronicle has provided an update based on the results. He finishes the article:
"...the 1,100p previous target price I outlined is looking increasingly conservative (‘A double bill of fund management plays’, 14 October 2021). Expect the payout to at least double over the next three years, too. Strong buy."
I think Simon's kept a conservative target in order to do a follow up article then push a higher target in the near future.
The shares are currently quoted at 765p giving a market capitalisation of £291 million. Full year results are due tomorrow on Tuesday 15/3.
The outcome for 2021 has been well flagged in a trading update (9/12/21) and a pre close trading update (27/1/22).
The figures that have been flagged are:
Profit £19.75 million
Cash £69 million
I still think a little will have been held back and that the reported outcomes will be slightly higher. However, using the figures above we get:
PE ratio 14.7 (market cap divided by profit)
Cash adjusted PE ratio 11.2 (market cap minus cash then divided by profit).
I think that the two ratios are very generous for a company growing at the rate that Gresham House is.
I'll be looking for:
Profit above £19.75 million
Cash above £69 million
Broker upgrades for 2022 and beyond
A further recommendation from Simon Thomson in Investors Chronicle.
With the shares close to a 12 month low and the prospect of strong results tomorrow I'm expecting a bit of a bounce. I've bought some more this morning.
As I thought at the time of the trading update published on 9/12/21, Gresham appear to have kept back a little of their performance which is apparent in their pre close trading update of 27/1/22
Trading update
... assets under management of at least £6.0 billion.. at least a 50% increase
Pre close trading statement
… Assets under management increased by £6.5 billion.. by 65%..
Trading update
Adjusted operating profit at least £18.5 million
Pre close trading statement
Full year adjusted operating profits expected to be in excess of £19.75
The two recent updates taken together with the recent 33% increase in target of AUM to £8.0 billion indicate a company that's at the top of its game, increasing profitability, increasing margins and increasing assets under management.
I'm hoping that when the good news is understood that the share price will attract a higher multiple reflecting the accelerating growth potential.
As an aside, the original five year target of £6.0 billion assets under management set on 5/3/20 has been achieved in 18 months!
I like your calculations may they hopefully come to fruition. On another note there is surely potential for AUM to improve beyond the recently upgraded target of £8bn for 2025 not sure if this is beginning or end of year target. Increase in AUM of 50% this year probably won't be repeated but even more modest increases of around 15 to 20% would see that target beaten. All in all points to steady growth as I am a long term investor rather than a trader that would be fine for me. Modest dividend payment has also increased for 3 years
I've tried to do some calculations regarding PE ratios and cash adjusted PE ratios in order to get a sensible target price.
I've used:
Gresham House annual report for year ending December 2020
Gresham House trading update 9/12/21
Simon Thompson IC article 14/10/21
On publication of the 2020 annual report the figures for Gresham were:
Share price £8.00
Shares in issue 34 million
Cash £45 million
Profit £12.1 million
This gives a market capitalisation of £272m (8 x 34)
That implies a PE ratio of 22.5 (272 ÷ 12.1)
And a cash adjusted PE ratio of 18.7 (272 - 45) ÷ 12.1))
If the share price remains £9.00 at the end of the year and all of the trading update figures are realised then:
Share price £9.00
Shares in issue 38 million
Cash £69 million
Profit 18.5 million
This gives a market capitalisation of £342m (9 x 38)
That implies a PE ratio of 18.5 (342 ÷ 18.5)
And a cash adjusted PE ratio of 14.5 ((342 - 69) ÷ 18.5))
Attaining a cash adjusted PE of 14.5 twelve months ahead of the Investors Chronicle target ( 14.5 for 2022 and 13 for 2023).
It may be more realistic to apply the cash adjusted PE from 2020 (18.7) to the 2021 figures and calculate a price target.
This calculation gives a share value of £10.92. ((18.5 x 18.7) +69) ÷ 38))
Would it be unrealistic to attribute a PE of 20? Certainly the current rate of growth could support such a multiple. And, what of profit and cash? I tend to think that the trading update will have held a little back: it will certainly be easier to report further outperformance rather than apologise for failing to attain an outcome you'd heralded a few months earlier.
With this in mind, applying cash if £70 million, profit of £20 million and a cash adjusted PE of 20 gives a share value of £12.36
Hopefully the above will provide some guidance as to the likely direction of travel of the share price although perhaps not an exact destination.
Rarely have I read such a positive and upbeat trading update as the one released by Gresham House this morning:
"...the Board expects to significantly outperform market expectations, delivering Assets Under Management ("AUM") in excess of £6.0bn, at least a 50% increase since the end of last year, driving further expected substantial increases in profit and margins. Adjusted operating profit is expected to be at least £18.5m and margins in excess of 32%, not including performance fees."
Expecting to "significantly outperform market expectations"
"Driving further expected substantial increases in profit and margins"
"... operating profit is expected to be at least £18.5m" (Last year it was around £12 million so we're looking to a 50% increase.)
On top of all of that, the shares are available at a 10% discount to the September fundraise.
The share price has drifted lately, however, I think that this absolute stonker of a trading update will reverse this. I've added to my holding
I sold this share in February at 820p bad timing however I needed a little capital at the time. however I am now back on board at 804p with a monthly top up also in place. Surely with all the furore about ESG investing this should be a good long term investment.
Thank you TeelaBrown & Stuartrm. Very helpful - and reassuring.
I think the share price drop has been an overreaction to losing the mandate for managing Gresham House Strategic.
As Simon Thompson of Investors Chronicle has updated his recommendation (Thursday 14/10/21) he points out that this fall is a repeat buying opportunity and retains his target of 1100p.
The article points out that the transaction with Hardwood will increase cash to £69.5m (183p per share). Cash adjusted PE's for the next two years are 14.5 and 13.
It is my view that the cash will likely be invested in further ESG opportunities which will be more profitable than the management fees and growth from GHS.