Impax Asset Management Share Discussion Threads

[martinthebrave] 29/11/2017 17:42

Graham Neary at Stockopedia specialises in Financials & he remains a fan:

Impax Asset Management (LON:IPX)
•Share price: 161.5p (-3%)
•No. of shares: 128 million
•Market cap: £206 million

Final Results

This is an environmentally-focused asset manager which I've written about several times this year.

Unfortunately, I didn't have the spare funds to invest in it earlier this year, when it seemed quite cheap against its earnings and prospects.

The value proposition is different now that the share price has trebled in a year:

So today's slight dip in the share price is in the context of a company where great things have arguably already been priced in.

The results are excellent, as expected. In the year to September, AuM increased by over 60% (we already knew this thanks to the Q4 update:

Assets under management and advice ("AUM") increased 61% to a new peak of £7.3 billion (2016: £4.5 billion), rising further to £7.6 billion by 31 October 2017

Record net inflows of £2.1 billion across several strategies and geographies

So inflows were responsible for three-quarters of the AuM, with market movements responsible for the rest.

Note also that the $52.5 million acquisition of similar US outfit Pax World is set to complete in Q1 2018. This is a debt-funded acquisition which will increase the company's risk profile in the short-term, but could super-charge earnings per share in future years.

The financial highlights below show the effect of operational leverage, as op. earnings rises at a much faster rate than revenue.

It's worth bearing in mind, naturally, that inflows during the year will not have generated fees for the entire year. You only generate fees on average AuM, not on closing AuM.

Revenue: £32.7 million (2016: £21.1 million)

Operating Earnings: £7.9 million (2016: £4.2 million)

Profit before tax: £5.9 million (2016: £5.2 million)

What may be disappointing investors a little bit is the rather muted PBT figure.

£1 million was spent on advice related to the Pax acquisition. £0.6 million has also been lost in FX translation of the value of foreign currency in advance of that deal. There are some more costs which are contingent on the deal completing.

Without those costs, Impax would have reported a 44% increase in PBT - it just goes to show how expensive deals can be in the short-term, and why organic growth is so valuable.

Overall, though, the results look satisfactory to me. A lot depends now on the deal successfully going ahead.

I've warned previously about inflows being from a relatively small number of customer mandates.

Today we get an update on the level of customer concentration here:

Revenue from three of the Group's customers individually represented more than 10 per cent of Group revenue, equating to £5,243,000, £4,275,000 and £3,428,000 (2016: three, equating to £3,644,000, £3,267,000 and £3,003,000).

As the company gets bigger, it will hopefully also become less risky, from an investment point of view, as customer concentration diminishes. For now, it is still quite heavily concentrated.

One other thing that caught my eye - whatever about the rights and wrongs of climate change/anthropomorphic global warming, it sounds like Impax is excited about its investments in the sphere of resource efficiency. That's a sector which ought to do well, regardless of global climate change agreements:

We see a proliferation of opportunities to invest in smart systems to manage inventory control, production lines and warehouse space, and to reduce transportation costs across most industries, most notably in consumer goods. We are also following the rise of blockchain technology, which has the potential to transform resource efficiency across supply chains.

Outlook statement is confident.

My opinion

The market cap is around the same ratio compared to (pre-Pax) AuM as it was last time I covered it, c. 2.7%. Again, I consider that to be around average.

The Pax deal increases the level of uncertainty but brings with it strong potential rewards.

Overall, then, I have about the same opinion as I did last time. It's a nice company and I still think it has a positive future. The costs associated with integrating Pax may continue to weigh in the short-term, and the valuation is no longer obviously cheap against its peers.

[robsy2] 29/11/2017 17:04

Just for the record , I have taken profits today.With the share price at this level, the future will need to be stunning and so bright that we’ll have to be wearing shades!
This company has come a long way in a short time and the valuation has gone even further, so i took some profits and sold half of my holdings..
It’s a hard one to call, because they are doing so well and they are going to continue to do well. This is a company with a big future but for me it is hard to justify the valuation. The valuation analysis is further (if nicely) complicated with te takeover, the deal looks sweet but hard to read.
Whichever way you look at it, IPX is now priced to perfection in that there is no room for any setbacks ....and there are usually setbacks, so the next move may well be down.

Taking profit will allow me to rebalance my portfolio which has become seriously skewed, due the stellar performance of IPX.
I still have a sizeable holding and am happy to stay a long-term holder.

R2

[martinthebrave] 29/11/2017 16:24

IC
Impax Asset Management (IPX) grew its assets under management by an impressive 61 per cent during the year to September. Net inflows were a record £2.1bn, while market gains contributed £655m. This helped lift pre-tax profits by 13 per cent to £5.9m. The shares may be up 242 per cent during the past 12 months, but we reckon they have further to run, buy.
I Hold

[melody9999] 29/11/2017 09:22

Solid results this am do not warrant a 10% fall in sp, even recognising it has increased recently. So I've topped up my holding at 150p.

[topvest] 28/11/2017 20:42

No chance of that near term given the merger. All looks very well set for growth in the year's ahead. An early mover in sustainable investment and this will be a hot area for year's to come in my view.

[firtashia] 28/11/2017 12:40

Results tomorrow, the share price is rising in anticipation.

[robsy2] 28/11/2017 12:27

My dread is that someone will take this out....
R2

[darrenp746] 28/11/2017 12:18

Definitely a strong move up today. Any news?

[gorilla36] 28/11/2017 11:39

mmmmm - Interesting! What is going on here then I wonder.

[robsy2] 08/11/2017 10:57

Cool.
R2

[dan hol] 08/11/2017 10:33

Another 300m on the AUM taking is to 7.6 bn - end of October. Roll on 8bn inside 2017.

[topvest] 26/10/2017 18:43

You did well. Happier with my sub-50p purchase price though! I'm surprised at today's reaction as the directors still have enormous holdings and the shares are tightly held so it was surely a sensible move to improve liquidity. Anyway,I'm not really tempted to sell as I think this asset manager has a really good "forward thinking" business model. They should continue to do very well.

[darrenp746] 26/10/2017 17:38

Yes I was dreaming lol, but glad to be in now at 133 didn't think I would get the chance

[topvest] 25/10/2017 19:54

LOL...in your dreams!

[darrenp746] 25/10/2017 19:51

Wanting in sub 120 tomorrow

[topvest] 25/10/2017 18:20

Hardly cashing out..they have lots left! Probably positive to widen the investor base.

[twistednik] 25/10/2017 17:04

Directors cashing out?

[edmonda] 23/10/2017 08:56

'morning all - reminder that webinar starts at 12.30 today

[edmonda] 18/10/2017 12:21

IPX shares up more than a third since they announced the Pax acquisition a month ago.

Next Monday 23rd the CEO and CFO are doing a webinar at 12.30pm to explain why it is such an important deal.

Register here to join in:

[martinthebrave] 13/10/2017 15:20

In case you can't see it -

IC View

At 152p, Impax's shares are well up on our recent buy tip (97.8p, 10 Aug 2017). After accounting for the £13m net cash on the balance sheet at the half-year stage, the shares trade at 22 times 2018’s forecast earnings. However, on a price-earnings growth (PEG) basis, they trade at a ratio of 0.8, suggesting there is further upside to come. Buy.

Last IC View: Buy, 131.5p, 20 Sep 2017

[dan hol] 13/10/2017 11:37

"Impax on a tear" worth a read - IC has IPX down as a BUY at 150p

[edmonda] 28/9/2017 17:23

Full ED research note on 'transformational' nature of Pax acquisition just out.

On www.equitydevelopment.co.uk or

[sharesoc] 28/9/2017 14:45

There is a detailed report by Cliff Weight on Impax who attended our London seminar on the 13th September, which can be found in our members area here:

ShareSoc full members can download Stockopedia reports, presentations from all of the companies that presented at this seminar, and this report from Cliff Weight on proceedings from our members area

To access the report, you'll need to be a full member of ShareSoc, which is a not-for-profit organisation that supports individual shareholders and campaigns for shareholder rights. If you're not already a member you can join here:

Once you've joined, you'll receive an invitation to register for our "members network" private social network, from where you'll be able to access the report (and reports on 100s of other meetings). If you're already a member and have any difficulty accessing the report, please do not hesitate to contact us here:

[varies] 20/9/2017 22:33

Correction
The maximum price payable for PAX is $90m rather than $80m, ie 2.00% of AUM rather than 1.78%