AssetCo performs better than forecasts says Zeus

AssetCo plc (LON:ASTO) has just completed its acquisition of River and Mercantile Group “RMG”, which has resulted in an increase in shares in issue from 8.4m to 14.4m.

RMG has an “established and well-respected equities team that manages around £2.7 billion of Assets under Management. Importantly, the acquisition provides the foundation stone to building a private markets business given its infrastructure investment team.” The Chairman says, “actions are being taken both on cost and building new revenue [to enable RMG to return] to profitability by early 2023.”

The RNS also provides details of AssetCo’s interim results to March 2022, trading at its associate, Parmenion, and progress in recent acquisitions (i.e. Saracen and Revera).

Highlights

¨ £12.2 billion AuM following the completion of RMG

¨ Proposed 13.0p interim DPS expected to be declared in 4Q22

¨ 1H revenues of £1.3m (comparative: nil)

¨ 1H loss before tax of £2.6m (comparative: £22.3m reflecting litigation claim)

¨ 31 March 2022 net assets of £55.6m (31 March 2021: £31.1m)

The announcement confirms the Board’s plans to sub-divide shares on a “basis yet to be determined”. The Board believes this would improve the efficiency of dealings in ASTO shares.

Outlook: “following the acquisition of, and return of capital from, River and Mercantile, the Group will have net cash of more than £45m.

Zeus view: better than forecast
We are pleased to see AssetCo has £2m more net cash than we expected. We expect AssetCo to have £43m net cash, after the RMG acquisition had completed (Exhibit 1, page 2).

We commented on Parmenion’s excellent results to December 2021 in our May 2022 research report. We maintain our forecasts for the enlarged group, which were set out in our April and May research notes.

Valuation: material upside
Based on proforma revenue, we see justification for 1704p a share (Exhibit 1, page 2). We see fully diluted equity value of 2709p per share (Exhibit 2, page 3) in September 2023 based on 2024E revenue and profitability.

Summary financials

Price700p
Market Cap£100.8m
Shares in Issue14.4m †
12m Trading Range700p – 2100p

† inc 6m new on RMG acquisition

Financial forecasts

Yr end Sept (£’m)2021A2022E2023E2024E
Revenue0.47.92843
y.o.y growth (%)n.a.1,975354154
Op. profit/(loss)-0.1-6.14.111.1
Other income & central costs #16.216.216.216.2
Adj. PBT16.1-8.92.69.7
Adj PAT14.8-8.22.87.5
EPS (p) basic adj.181-781950
EPS (p) ful dil. adj161-731849
DPS (p)131415
Net cash26.935.332.738
Dividend yield (%)11.11.2

# Includes share of associate PAT & share based charge

Source: Audited Accounts and Zeus estimate

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