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. Moreover, it also provides investors a range of geographical and sector investment opportunities. 

Recent trend of dividend payments

POLR has a progressive dividend policy and declared an interim dividend of 14.00 pence per share, to be paid 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 pence per share of interim dividend for H1 FY21.

Growth Prospects

• Decent Operational Progress: POLR had shown an excellent growth of around 50% in the net management fees to £92.9 million during H1 FY22.
• New Launches: The Company had launched Polar Capital Smart Energy and Smart Mobility Funds in September 2021. Moreover, it had fared well with early flows and demonstrable appetite from potential investors in these funds.
• Robust Inflows: The largest beneficiaries of net inflows were the sustainability oriented Emerging Market Stars Fund with £366 million of net inflows and the Asian Stars Fund which had net inflows of £70 million.

Key Risks

• Wrong Strategic Choices: The failure of partner relationships could adversely impact the business in the near term.
• Omicron Variant: The Government-led restrictions under Plan B because of an increasing number of Covid-19 cases in the UK may adversely impact the UK Equities.
• Federal Reserve Meeting Minutes: The recent hawkish comments regarding a faster-than-expected interest rate hike in the recently released Federal Reserve meeting minutes may create pressure on global Equities.
• Interest Rate Hike: The recent interest rate hike of 0.15% to curb inflation may keep investors’ away from the UK Equities.
  

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern 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 result)

• 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 11 January 2022, at 09:09 AM GMT, POLR’s shares were trading at GBX 732.00, up by around 0.27% from the previous day closing price. Stock 52-week High and Low were 951.00 and GBX 630.00, respectively.

From a technical perspective, the stock price is hovering around the lower Bollinger band, indicating an upside potential in the stock price. Meanwhile, the 14-days RSI of ~31.64 is reflecting an oversold territory.

Over the last two years, POLR’s stock price has delivered a positive return of ~30.46%, and it has outperformed the FTSE All-Share Financials index (benchmark sector) with a return of around negative 1.39% and FTSE AIM UK 50 index (benchmark index) with a return of approximately 17.23%. 

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

Business Outlook

The Company’s several funds outperformed during H1 FY22, illustrating excellent strategic decisions made by the Company. POLR would seek to re-invest across all divisions in the business during H2 FY22 and aimed to maximise the long-term growth opportunities. Meanwhile, the Company had shown an excellent growth in the Asset under Management and the Net Management Fees during H1 FY22. POLR may undergo sizeable corrections because of the rising interest rates prospect, global inflation, and Omicron variant of the Covid-19 pandemic. Nonetheless, the Company remained cautiously optimistic about the prospects for modest profitability growth over the medium term.

Considering the decent AuM growth during H1 FY22, robust bottom-line business growth, strong leverage position, consistent dividend payments, 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 732.00 (as on 11 January 2022 at 09:09 AM GMT), with lower-double digit upside potential based on 14.96x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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