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Analyst believes Gresham House Strategic won’t stay cheap for long
Thursday 29 Jun 2017 Author: David Stevenson

Want to get paid while someone else does the hard work? If so, take a look at Gresham House Strategic (GHS:AIM), an investment company with a difference.

It focuses on smaller firms and takes large concentrated bets on stocks. It presently owns stakes in 11 companies and just under 40% of its portfolio is dedicated to a single company, being cloud communications software firm IMImobile (IMO:AIM).

Gresham

Fund manager Graham Bird has a vigorous selection process for his stocks and will often take months to get to know them before investing. ‘There are significant inefficiencies in this part of the market and you can often find things that are wrongly priced,’ says Bird.

He categorises himself as an active investor, not an activist investor. Bird says he will engage with a company and offer corporate advice to which smaller players often are not privy compared to their FTSE 100 peers.

‘The manager aims for a considerably higher level of engagement with investee company stakeholders aiming to benefit from market pricing inefficiencies and support a clear value creation plan, targeting above market returns over time,’ says Jeremy Grime, an analyst at stockbroker FinnCap.

‘As profits are realised, 50% of crystallised profits are returned to shareholders.’

Gresham table

Making considerable progress

Gresham House Strategic’s recent full year results (published 9 June) showed a 7.6% increase in net asset value over the 12 month period to 31 March 2017 and a maiden dividend of 15p per share. It ended the year with circa £13m cash.

Its shares trade at a 21% discount to its net asset value of £11.55. That assumes 1.1m shares in IMImobile will be sold to two other Gresham House vehicles at 193.5p per share as part of a rebalancing exercise, expected to happen by the end of 2017.

Grime at FinnCap believes the discount to net asset value will move to a premium once IMImobile becomes less dominant in the portfolio.

‘At a time when the small cap market is reaching an all-time high, it seems anomalous that a small cap value fund should trade at a discount to net asset value,’ adds Grime. ‘The company has a strong pipeline of new investment opportunities and we expect the cash to reduce.’ (DS)


 

Gresham House Strategic (GHS) 910p

Stop loss: 637p

Market value: £34.7m

 

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