Tatton Asset Management interims & outlook justify upgrade says Zeus Capital

Tatton Asset Management plc (LON:TAM) has maintained “strong growth across all key metrics of AuM, revenue and profits”. In addition to the 20% growth in AuM to £10.8 billion reported in its October update, Tatton’s interim results reveal:

  • 26.4% revenue growth to £13.8m;

26.5% growth in Tatton division revenue;

26.1% growth in Paradigm division revenue;

  • 37.9% rise in adj operating profits to £6.9m

50.1% adj operating margin (prior year: 45.9%)

  • 33.7% rise in adj fully diluted EPS to 8.76p
  • 14.3% rise in interim DPS to 4.0p (prior year: 3.5p)

Outlook: Paul Hogarth, Tatton Asset Management CEO observed: “Trading momentum has continued since the last market update and post Period end and, as a result, we now anticipate that trading for the current financial year will be ahead of the Board’s previous expectations.”

Zeus view: Tatton has grown faster than we had forecast. Assuming net inflows of £100m a month (i.e. £1.2 billion pa from £1.0 billion pa), we raise our expectation of AUM on 31 March 2022 and 2023 from £10.65 billion and £11.65 billion to £11.5 billion and £12.7 billion respectively (i.e. 8.0% and 9.0% increases).

We have recalculated our forecasts for FY(Mar)22 and FY(Mar)23 using updated market values and forecast inflows at £100m a month. In summary, we: 

  • Raise our revenue forecasts 4.3% & 7.6% to £29.0m & £33.9m;
  • Raise our EBITDA forecasts 5.8% & 11.2% to £14.7m & £17.9m;
  • Raise our adj PBT forecasts 5.4% & 11.3% to £13.6m & £16.8m;
  • Raise our adj diluted EPS 4.9% & 5.7% to 17.8p & 20.9p respectively.

This does not, in our opinion, fully reflect the positive impact of the Fintel 5 year distribution agreement both direct (through increase AuM, revenue and profits) and indirect (through increased engagement with IFAs).

We republish our analysis of Tatton’s multiple partnerships, including Fintel, on page 3, exhibit 2.

Valuation: At 580p a share and with c24p per share cash, Tatton has an enterprise value of c £327m, and is trading on EV/sales of 11.3x. This is consistent, in our view, with our expectation of EBITDA margin of over 50% and revenue growth of over 17% pa for next year.

We expect Tatton Asset Management shareholder return to be driven by revenue growth.

Benefits of scale should lead to faster revenue growth and even faster profit growth. Tatton’s partnership with Fintel provides the opportunity for many more years of double-digit growth in IFA firms, clients, AuM, revenue, profits and dividends.

Click to view all articles for the EPIC: ,
Or click to view the full company profile:
    Share on facebook
    Facebook
    Share on twitter
    Twitter
    Share on linkedin
    LinkedIn
    Tatton Asset Management Plc

    More articles like this

    Inchcape

    Inchcape expands its distribution footprint into the Caribbean

    Inchcape plc, (LON:INCH), the leading independent global automotive distributor, has announced an agreement to acquire Interamericana Trading Corporation (ITC) and Simpson Motors from the Simpson Group. The deal will expand Inchcape’s global footprint with entry into the Caribbean,

    Pendragon plc

    Pendragon upgrades full-year underlying PBT expectation

    Pendragon PLC (LON:PDG) has provided a trading update and increases underlying profit before tax guidance for the full year to 31 December 2021 from approximately £70.0m to approximately £80.0m. The Group has continued to perform strongly during the

    CentralNic

    CentralNic’s growth is accelerating rapidly says Zeus Capital

    CentralNic Group plc (LON:CNIC) growth is accelerating rapidly and benefiting from the trend towards tightening privacy policies. In addition, margins are expected to widen after current investments plateau and the company expects further earnings accretive acquisitions. 9M 2021

    Tatton Asset Management Plc

    Tatton Asset Management New deals not yet factored in (Interview)

    Tatton Asset Management plc (LON:TAM) is the topic of conversation when Zeus Capital Research Analyst Robin Savage joins DirectorsTalk Interviews. Robin talks us through the key points from the interim results for the six-month period ended 30 September