Analyst Numis has given Assetco a ‘buy’ recommendation after concluding that Martin Gilbert’s wealth and asset management consolidator offers “significant opportunities” to build shareholder value.
The outfit, led by Gilbert (pictured), has made a trio of investments in the past six months based on its aim to “acquire, manage and operate asset and wealth management activities and interests, together with other related services”.
Last month, it announced the acquisition of a majority stake in exchange traded funds provider Rize ETF. This came after earlier in July it added a 30% stake in Parmenion in a deal expected to complete at the end of September. In May it acquired Edinburgh-based equity boutique Saracen Fund Managers.
This followed the acquisition of a 2.9% stake in River and Mercantile in January, which it doubled the following month to bring its total share capital of the asset manager to 5.6%.
‘Material upside’ for shareholders
Numis said the most sensible way to analyse Assetco was to assess these individuals investments and what they might be worth in the medium term after discounting back at an appropriately high discount rate to reflect the risks.
It also considers the company’s other known and foreseeable assets including River and Mercantile, cash, liabilities – including commitments made and long-term incentive plan (LTIP) accrual – and costs.
But it said while it expected Assetco to make “many” more acquisitions, it does not place any explicit value on any potential future deals “as each should be judged on its individual merits at the time”.
It said: “Assetco is still at an early stage of its life and strategy (as are certain of its investments), thus we believe an investment today is as much about taking a view on management’s ability to deliver their strategy, as it is the investments made so far.
“We believe that they can, we see significant opportunities to build shareholder value and we think this could deliver material upside for shareholders.”
However, it did highlight the biggest risks to shareholders as the potential for dilution in any future equity raises and from the uncapped long-term incentive plan (LTIP) arrangement for senior executives. It also flagged the early-stage nature of the investments, the inherent risks of acquisitions and key person risk associated with management.
The LTIP will see 20% of any annual growth in market cap, uplifted for any dividends paid, being delivered to key management and employees of the firm.
Numis concluded: “Taking into account both the considerable opportunity for value creation that we see and the risks, we value the company at 2,064p and place a buy recommendation on the shares.”
Assetco names latest hire
It comes as Assetco has named its latest hire as Lucy Draper who will be joining the business as director – distribution.
Draper was previously director, business development – Middle East Africa at Standard Life Aberdeen based in Abu Dhabi. Prior to this, she was a senior business development manager working with UK wholesale clients.
She has also worked in Asia leading the sales strategy with private banks in Hong Kong and developing relationships with institutions across the region. She joined Aberdeen Asset Management in 2007 as a graduate trainee.
Draper will work alongside and report to Assetco head of distribution Gary Collins.
See also: Martin Gilbert’s Assetco recruits Columbia Threadneedle head of distribution
Collins said: “Lucy is a fantastic addition to the Assetco team. Her experience and knowledge both from a client channel and regional perspective will be invaluable as we look to develop and grow the Rize and Saracen businesses.”
