Impax Asset Management Group PLC

Impax Asset Management Group PLC (LON: IPX) is a FTSE AIM UK 50 index specialist asset manager with £34.4 billion of assets under management (AuM).

Investment Highlights – SPECULATIVE BUY at GBX 1,081.00

• Favourable Trends: As the world moves toward a sustainable economy, investment in Companies dealing with global sustainability challenges (such as pollution, climate change, resource efficiency, among others) can yield attractive returns for the Company.
• Strong Trading and Outlook: High client demand levels boosted the growth in net inflows and assets under management during Q4 FY21. IPX has a solid pipeline for potential investors and shall benefit from the thematic investment in sustainable entities.
• Technical Indicator: From a technical standpoint, 14-day RSI (~42.15) is close to an oversold position, while the stock price is hovering around the lower Bollinger Band.
• Outperformance Against Index: IPX has surged around 112% in the past year, showing significant outperformance against the benchmark index, FTSE AIM UK 50 index.

Key Risks

• Currency Risk: The constant strengthening of US Dollar (supported by increasing US Treasury Yield combined with slowdown in Chinese economic growth) can impact the assets’ value.
• Emerging Risk: The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial markets. Moreover, the structural changes imposed by the Covid-19 pandemic has significantly changed the consumers’ behaviour.

Q4 AUM update (for the quarter ended 30 September 2021, as on 7 October 2021)

 (Source: Company Website)

• AuM Growth: IPX reported an 8% growth (from the last quarter end) in AuM to £37.2 billion.
• Record Net Inflows: It continued to enjoy exceptional growth with net inflows of over £10 billion.
• Good Customer Services: IPX continued to deliver strong services and the asset owners globally are increasingly interested.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Cash Flow Approach (FY21) (Illustrative) 

Conclusion

IPX demonstrated an 84.3% increase in AuM year-on-year. Its global distribution capabilities continued to position the Company well for further growth. IPX is an established investor with an ESG investment strategy. Despite the market volatilities, the Company witnessed a strong client demand in Q4 FY21. The post-pandemic fiscal packages introduced by governments across the globe shall also boost investors and consumers' confidence. The stock made a 52-week high and low of GBX 1,330.00 and GBX 500.00, respectively.

Based on the robust client demand, increased assets under management, favourable industry trends, and valuation conducted above, we have given a “Speculative Buy” recommendation on Impax Asset Management Group PLC at the current price of GBX 1,081.00 (as on 21 October 2021 at 08:08 AM GMT+1), with lower double-digit upside potential based 39.83x Price/Cash Flow (approx.) on FY21E Cash Flow Per Share (approx.).

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

*The reference data in this report has been partly sourced 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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