Jupiter Fund Management PLC

Jupiter Fund Management PLC (LON: JUP) is an FTSE 250 listed asset management entity, focusing on individual and institution clients through its diverse saving products.

On 25 February 2022, JUP expects to release its FY21 results for the year ending 31 December 2021.

Rationale for Valuation – SPECULATIVE BUY at GBX 227.40

• Stable Fundamentals: JUP has shown improvement in AUM with strong gross flows. Its earnings per share rose 15% year-on-year in H1 FY21 and it kept an interim dividend unchanged at 7.9 pence per share.
• Net Inflows: The positive market movements supported the net inflows across fixed income and key growth funds.
• Technical Indicator: From a technical standpoint, JUP’s stock price is trading around the lower Bollinger band, while 14-day RSI (~27.19) reflects an oversold scenario.
• Undervalued Multiples: On a forward 12-month basis, key valuation multiples (EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow, and Price/Book) are quite lower than the median of the Financials sector.

Key Risks

• Macroeconomic Uncertainty: As the Federal Meeting has signalled the interest rates hike and monetary policy tightening, it can keep the equity market under pressure.
• Operational Risk: The spread of the Omicron variant of coronavirus may increase restrictions and adversely impact the bottom-line profitability.

Trading Update (for the three months to 30 September 2021, as of 15 October 2021)

   (Source: Company Website)

• Assets under management (AUM): JUP ended Q3 FY21 with £60.7 billion in AUM, reflecting an increase of £0.4 billion from 30 June 2021.
• Net Outflows: Due to the continued weakness in client demand for the UK and European equity strategies, and net redemptions from mutual funds, the Group witnessed a net outflow of £569 million during Q3 FY21.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Book Approach (FY21) (Illustrative)

Conclusion 

The closing AUM has been constantly increasing every quarter since Q1 FY20, reflecting a positive market movement. Moreover, JUP reported solid underlying profitability in H1 FY21. It has consistently shown a strong investment performance and cost synergies. Therefore, it is well-positioned to generate an incremental value for its shareholders. The stock made a 52-week High and Low of GBX 309.40 and GBX 226.40, respectively.

Based on the AUM growth, strong net inflows, robust profitability, we have given a “SPECULATIVE BUY” stance on Jupiter Fund Management PLC at the current market price of GBX 227.40 (as of 27 January 2022, at 8:25 AM GMT), with a lower-double digit upside potential based on 1.57x Price/ Book (approx.) on FY21E Book Value per share (approx.).

Numis Corporation PLC

Numis Corporation PLC (LON: NUM) is a FTSE AIM UK 50 index listed independent institutional stockbroker and corporate advisor.

Rationale for Valuation – SPECULATIVE BUY at GBX 316.00

• Dividend: Numis has maintained the consistent distribution, as full-year dividend rebased to 13.5 pence.
• Solid Top-line Growth: Numis has delivered annual revenue growth of 44% over three years, on the back of continued strategic focus on its private markets Growth Capital Solutions business.
• Technical Indicator: From a technical standpoint, 14-day RSI (~38.79) is in the oversold territory, while the stock price is hovering close to the lower standard deviation of the Bollinger Bands.
• Undervalued Multiples: On a forward 12-month basis – EV/Sales, EV/EBITDA, and Price/Earnings valuation multiples of Numis are undervalued against the Investment Services industry.

Key Risks

• Subdued UK Macroeconomic Indicators: The UK Composite PMI fell marginally to 53.4 in January 2022 from 53.6 in December 2021, while the UK consumer price inflation breached a nearly 30-year high of 5.4% in the 12 months to December 2021.
• Market Risk: The Company is also exposed to market risk with high volatility in the equity market, and loss of clients with subdued investors’ sentiments. Also, the likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial markets.

Financial Highlights (for the year ended 30 September 2021, as on 8 December 2021)

(Source: Company Website)

• Revenue Growth: During FY21, revenue jumped over 39% on FY20, reflecting a strong trading momentum.
• Profit Growth: The profit before tax grew around 100% on FY20, reflecting the benefit of operational gearing. Similarly, net assets were also up by 18.5% year-on-year to £186.7 million.
• Liquidity: It also reported a 7% year-on-year increase in cash balance to £134.1 million (FY20: £125.2 million).

Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

Conclusion 

Driven by the recovery in IPO volumes and M&A, there was a 52% year-on-year growth in Investment Banking revenue. Numis also reported further market share gains in UK equities. Numis’ pipeline also remained robust, and the wider market outlook is positive. It also expects to launch several IPOs in FY22, and continuing progress on its strategic priorities. In a nutshell, FY21 remained an excellent year for Numis, and it well-positioned to generate incremental shareholders’ value. The stock made a 52 week High and Low of GBX 419.86 and GBX 310.00, respectively. 

Based on robust revenue growth, strong profit generation, significant progress on strategic priorities, favorable market dynamics, supported by the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Numis Corporation PLC at the current market price of around GBX 316.00 (as of 27 January 2022, at 8:20 AM GMT), with lower-double digit upside potential based on 10.04x Price/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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