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Miton can keep momentum going
UK investors’ appetite for active management is demonstrated by asset manager Miton (MGR:AIM) adding over £1bn in assets under management (AUM) in a year.
The company’s AUM at the end of August stood at £3.5bn and its rising profile has drawn in Jim Pettigrew as chairman subject to FCA approval.
Pettigrew was formerly chairman of RBC Capital Markets Europe and the company’s chief executive David Barron says: ‘Pettigrew had choices. His coming to Miton at this stage of our life is a real testament to our development.’
The arrival of Pettigrew is great news for the firm after it lost two star fund managers, George Godber and Georgina Hamilton, to rival Polar Capital (POLR:AIM) in 2016. One of the fallouts of this was a 15% increase in operating costs to £7.1m as the company re-jigged its fund manager compensation system.
The firm still has some impressive fund managers; for instance, David Jane who heads up the firm’s multi-asset fund range. He was previously head of equity investments at M&G, which is an investment division of Prudential (PRU).
Gervais Williams, executive director of Miton, is also a seasoned industry figure.
Cash is king
Asset management is a very cash generative business. At the half year point, Miton had a cash balance of £18.2m. The firm also executed a share buyback in the first half costing £2.6m by acquiring and cancelling over 6m shares.
The cost of buyback was largely offset by the £1.9m of net cash the firm generated in the first half.
Miton’s pre-tax profit of £2.9m beat Peel Hunt’s forecast of £2.6m as did its revenue figure of £10.3m.
Stuart Duncan, analyst at Peel Hunt, says: ‘Miton is currently enjoying a period of positive momentum, with increased diversification of the business beneficial to the longer-term prospects’. His price target of 50p implies 23.5% upside on its current share price.
Duncan adds the ‘group’s valuation continues to underestimate the prospects of the business’ as it trades on a forecast December 2018 enterprise value to net operating profit of 8.7 times, a significant discount to its peers.