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.   

The company plans to announce its FY22 results on 27 June 2022.  

Investment Rationale for Valuation – Speculative Buy at GBX 522.00

• Funds Launch: The Group has launched the Polar Capital Smart Energy and Smart Mobility Funds in September 2021. It was well received by the investors with the funds depicting early flows.
• Decent Performance: The Company reported an improvement in core operating profit by 65% to £36.3 million in H1FY22, compared to the prior corresponding period.
• Dividend: The Company declared an interim dividend of 14.0 pence per ordinary share in H1FY22 and was paid in January 2022. This reflects an increase of 56% to the prior corresponding period.
• Technical Indicator: The price of the stock is hovering near the lower Bollinger band with a 14-day RSI level of ~32.79.

Key Risks

• Market Risk: The investment markets have been very volatile of late owing to a number of macro issues like rising inflation, hike in interest rates, and the outbreak of war in Ukraine. These factors are expected to keep the equity markets under stress in the near term.
• Investment Risk: The Group draws in funds from varied investors and adverse reporting in fund performance might impact the company’s business.    

AUM Update (for the financial year to 31 March 2022, as of 14 April 2022)

(Source: Company Website)

• Update on AUM: The Group reported AUM at £22,121 million as of 31 March 2022, compared to £20,863 million reported as of 01 April 2021.
• Net Inflows: The Company reported net inflows of £230 million during Q4FY22, driven by its sustainable Emerging Markets Stars and sustainable Smart Energy & Smart Mobility strategies.

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E)

Conclusion

The management believes that concerns on climate change will reflect in growing demand for greener technologies. The Group is confident about its diverse and differentiated range of sector, thematic and regional fund strategies performing well going forward.  

The stock made a 52-week high and low of GBX 951.00 and GBX 500.00, respectively.

Based on the increase in AUM, decent fundamentals, strategic addition of funds 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 market price of GBX 522.00 (as on 11 May 2022, 01:30 PM GMT+1) with lower double-digit upside potential based on 10.00x 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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