Polar Capital Holdings PLC

Polar Capital Holdings PLC (LON: POLR) is an investment management entity listed on the FTSE AIM UK 50 Index. It offers a diverse range of geographical and industry investment options to investors.

On 27 June 2022, POLR is expected to announce its preliminary results for the 12 months ended 31 March 2022.

Investment Rationale for Valuation – Speculative Buy at GBX 560.00

• AUM Update: The Group reported an increase of 6% in AUM to £22.1 billion as of 31 March 2022, compared to £20.9 billion reported as of end of March 2021. The increase has been achieved on the back of net inflows, market uplift during the period, and related outperformance.
• Rise in Profits: The company reported an increase in pre-tax profit to £31.7 million in H1FY22, compared to £27.0 million reported in the prior corresponding period.
• Dividends: The management declared an interim dividend of 14.0 pence per share, compared to 9.0 pence paid in January 2021. The dividend was paid on 14 January 2022.
• Technical Indicator: The price of the stock is trading above the 20-day MA trend line, reflecting a bullish price momentum.

Key Risks

• Macro Risk: The current macro scenario is very volatile as inflation concerns have triggered worries of aggressive policy tightening by the Federal Reserve, which can add to the stress of equity markets.
• Performance Risk: The Group is prone to performance risk and is expected to deliver decent returns for its investors. The failure to provide decent return statistics might dent investor confidence in the funds.  

Financial Highlights (for the six months to 30 September 2021, as of 22 November 2021)

(Source: Company Website)

• Rise in Management Fees: The Group reported an increase in net management fees to £92.9 million H1FY22, compared to £61.8 million clocked in H1FY21.       
• Core Operating Profit: Core operating profit of the Group increased to £36.3 million in H1FY22, from £22.0 million in the prior corresponding period.

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E)

*Peers: Few peers considered are XPS Pensions Group PLC, Abrdn PLC and St James's Place PLC.

*All selected peers are LSE-listed Companies from the Financials sector.

Conclusion

Based on the decent H1FY22 performance, rise in management fees, improvement in core operating profit, 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 closing market price of GBX 560.00 (as of 10 June 22) with lower double-digit upside potential based on 13.08x Price/NTM Earnings (approx.) on FY23E earnings per share (approx.).

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.

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.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

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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