Polar Capital Holdings PLC (LON: POLR)

Polar Capital Holdings PLC is an FTSE AIM UK 50 Index listed investment management company. POLR offers professional and institutional investors a range of research-driven funds diversified by asset class, geographical and sectoral specialization.

Recent trend of Dividend Payments

POLR has a progressive dividend policy and paid an interim dividend of 14.00 pence per share attributable for H1 FY22 on 14 January 2022, while the ex-dividend date was 23 December 2021. Moreover, it represented year-on-year growth of around 56% as the Company paid 9.00 pence per share of interim dividend for H1 FY21.

(Source: LSE website; Analysis done by Kalkine Group)

Growth Prospects

• Solid AuM Update: On 13 January 2022, POLR reported that it had £24.3 billion of AuM as on 31 December 2021, reflecting a 16% jump since the end of March 2021. It reflected the combination of market uplift, strong net inflows, and outperformance.
• Diversification Strategy: POLR had benefitted from its diversification strategy with net inflows exceeding £300 million during Q3 FY22 in their sustainable Emerging Markets Stars strategies and the Smart Mobility strategies.

Key Risks 

• Market Risk: Any volatile movement in the market or forex could have a material impact on the operations of the Company.
• Record UK Inflation: The annual rate of UK consumer price inflation reached 5.5% in January 2022, the highest since March 1992. Thus, it can adversely impact the London equities.
• Wrong Strategic Choices: The failure of partner relationships could adversely impact the business in the near term.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.

Key Fundamental and Shareholders Statistics of Polar Capital Holdings PLC. 

Canaccord Genuity Wealth Management is the most significant shareholder as it holds nearly 9.17 million shares as of 31 December 2021.    

H1 FY22 Financial & Operational Highlights (for six months ended 30 September 2021, as of 22 November 2021)

(Source: Company Filings)

• Decent Growth in AuM: POLR had shown an increase of £2.5 billion in AuM from £20.9 billion at the end of FY21 to £23.4 billion for H1 FY22, an increase of approximately 12% over the period.
• Robust Profitability: The core operating profit jumped by around 65% to £36.3 million during H1 FY22.
• Balance Sheet: POLR remained well capitalised and debt-free, with net assets of more than £98 million and £67 million of own free cash on the balance sheet.
  

Financial Ratios (H1 FY22)

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 08 March 2022 at 08:00 AM GMT, POLR’s shares were trading at GBX 515.00, down by around 1.34% against the previous day closing price. Stock 52-week High and Low were GBX 951.00 and GBX 504.00, respectively.

On a daily chart, the stock price is sustained around the lower Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-days RSI of ~34.21 reflects an oversold territory.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative) 

Business Outlook

POLR has shown a substantial growth in the net management fees and the average AuM during H1 FY22. The Company has replicated a positive net inflows momentum of Q3 FY22 into the first two weeks of January 2022 because of the diverse range of complementary funds. The Company had launched Polar Capital Smart Energy and Smart Mobility Funds in September 2021. Moreover, these funds fared well with early flows and demonstrable appetite from potential investors in these funds. Overall, POLR would seek to re-invest across all divisions in the business during H2 FY22 and aimed to maximise the long-term growth opportunities.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the strong growth in AuM, decent profitability, high dividend yield, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Polar Capital Holdings PLC at the current price of GBX 515.00 (as of 08 March 2022 at 08:00 AM GMT), with lower-double digit upside potential based on 10.73x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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