Significant endorsement

Strong FY23 results

Finals ahead, touching distance to 20:20 AuM target

FY23 adj. EBITDA was materially better (£7.6m vs SCMe £4.9m) on higher initial fees and interest income. Core management fee income was in line. Underlying growth in investee companies indicative of value creation offset multiple contraction. £1.4bn AuM is tracking toward the £1.6bn FY24e “20:20 vision” target, although we see scope for outperformance with plentiful organic opportunity. We increase our forecasts from higher initial fees and interest income. We reiterate our BUY noting value acro

Impressive net inflows, strong balance sheet liquidity

Mercia has performed strongly raising >£80m across a number of strategies, against prevailing headwinds. This organic growth demonstrates the ability to scale high RoE 3rd party AuM. We leave our forecasts unchanged at this stage given our assumptions around organic net inflows. The balance sheet remains strong with £37.8m unrestricted cash available (33% mkt cap), alongside liquidity in managed funds, to support investee companies. We reiterate our BUY recommendation and 66p 12m Target Price, s

FLASH: Strong realisation proving the model

Exit of Intechnica signals quality & further progress

MERC has announced the sale of Intechnica Holdings for a total enterprise value of £14.5m (25.5% holding from MERC), driving cash proceeds of £3.7m and equating to a 27% IRR and 1.7x multiple on its current holding value. Additionally, MERCs third-party funds collectively held a further 27.9%, for which the exit generated a 32% blended IRR (2.6x MOIC). The Groups exit of Intechnica marks another successful exit from its balance sheet portfolio and underpins once again the high quality inherent t

Resilient H1, accretive acquisition adds £415m FuM

We are encouraged by sustained growth during H1 which has driven adj. operating profit to £3.6m (51% yoy). NAV grew by 10% as underlying growth exceeded cautious valuations. Mercia has acquired private credit manager, FDC, for up to £9.5m cash. It is immediately earnings enhancing with strong strategic rationale, bolstering regional SME credentials. Adding £415m FuM, Mercia is within touching distance of “20:20” strategic goals ahead of time. We leave forecasts largely unchanged. VCT income is l

Good H1 results plus very accretive acquisition

Mercia Asset Management - Termination of coverage

Edison Investment Research is terminating coverage on Mercia Asset Management (MERC), Bloc Ventures (unlisted), YOC (YOC.DE), Genuit Group (GEN), AlzeCure Pharma (ALZCUR), abrdn Latin American Income Fund (ALAI), Magforce (MF6), OPG Power Ventures (OPG) and paragon (PGN). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.

Further Capital Deployment within the Balance Sheet

Mercia Asset Management has announced two new investments within its balance sheet portfolio, notably (1) a £3.0m equity investment into Med Tech business Axis Spine, equating to a 11.7% equity stake (alongside Mercia’s managed funds holding of 33.6%) and; (2) a £2.3m convertible loan for Clean Tech business Nova Pangea. Both business have also seen investments from the Group’s managed funds, underpinning MERC’s de-risked sourcing strategy. We do not make any changes to our forecasts but see thi

FLASH: Two new investments

FLASH: In-line AGM statement

Mercia Asset Management - A safe haven for investors awaiting the upturn

As a regionally focused specialist asset manager, Mercia does not expect to experience the same highs and lows in valuations seen in more international growth markets. Mercia offers a defensible UK regional proposition, well aligned to the government’s levelling-up and SME agendas, with its venture portfolio supplemented by private equity and debt funds, investing across the digital media, software, life sciences and engineering sectors. With recurring fee income from FUM of £758m at 31 March 20

Mercia Asset Management - Excellent results despite the tough market

FY22 was the first year of Mercia’s Vision 20:20 strategy, and a year of real progress for the group. Mercia reported FY22 PBT of £27.4m, with AUM rising marginally to £959m, passing the £1bn mark with £45m of VCT and EIS funds raised post-year-end. Mercia exited Faradion, its second largest holding (4.2x ROI, IRR of 72%) and also completed a major up-round for nDreams, helping to drive net assets up 14% to £200.6m and NAV per share to 45.6p. Mercia trades at 0.65x FY22 NAV/share and at 0.56x ad

Strong FY22 results, NAV upgraded

Strong H1'23 results; forecasts upgraded

LIBERUM: Housebuilders: Darkest before dawn

Strategic progress drives robust growth

H1 interims are in line. Argentex has delivered strong growth (+28% yoy revenue) by driving growth initiatives. New technology-enabled products have been launched, including Alternative Transaction Banking, which are already delivering compelling growth ahead of expectations. Pressing into Europe via the Netherlands is also delivering strong growth. At the core, client KPIs remain strong. We leave our forecasts unchanged, with revenue momentum continuing into Q3. We believe the current 12.4x Dec

LIBERUM: Alpha Group International: A winning business at a cheap valuation

LIBERUM: Housebuilders: Rate peak nears & Gove less BANANAs

Equals Group (EQLS LN) - Interims justify rise in forecasts

What’s new: Equals Group has delivered outstanding interims, which have exceeded even the positive commentary at the Capital Markets Day in May and the trading update on 5 July. With trading “ahead of expectations”, we raise our 2023E revenue forecast by 7% to £95m and adj EBITDA forecast by 11% to £20m, as well as nudging up our forecasts for 2024E and 2025E.

LIBERUM: Alpha Group International: Underlying strength

H1 23: focusing on capital generation

Promising results for M&G in H1 23. The new CEO, Andrea Rossi, continues to execute the company’s new strategy, and we have confidence that he is positioning M&G to surpass its financial targets for the 2022-24 plan. The H1 23 operating capital generation results significantly outperformed expectations, exceeding the consensus by more than 50%. This substantial capital accumulation is poised to deliver strong returns to shareholders, rewarding them for their patience during this transitional per

Gore Street Energy Storage + (GSF, House Stock, 84p) - Steady NAV growth

Robust interims; small reductions to FY24 forecasts

LIBERUM: Harworth: Valuation gains reflect management actions and operational progress

LIBERUM: Pollen Street : Fundraising momentum continues

Taking the Upper Brand: Brands Sector Overview

The earliest dated brand has long been contested; the majority point to Kongō Gumi, a family run construction company that specialised in Buddhist temples in Japan; its documented record of ownership goes back to 578 AD. Like Kongō Gumi, several different brands have withstood the test of time, albeit without then same degree of longevity. The term brand originates from the 1500s and means "to burn" in Ancient Norse and was initially used to mark cattle for ownership. This practice can be consid

Interim Results

FSFL, a UK centric solar electricity generator, delivered a solid H1’23 total return (-2.4%) in a difficult environment. During the period, the fund continued with its forward sales (locking in cashflows for the next 2.5 years), increased its discount rate by c50bps to 7.5% (UK), maintained its medium term inflation (2024-2030) assumption of 3.0% and announced plans to recycle 200MW of assets into higher returning projects. During 2023 the sector has de-rated as investors, grappling with valuati

Morning Note – 6 September 2023