Miton: a less geared market play than larger peers Miton Group is a fund management firm led by former Gartmore fund manager Gervais Williams. Mr Williams took the helm in March 2011. His appointment was part of a change of control of the business from when it was known as MAM Funds. This change was accompanied by a significant fundraising that successfully wiped out MAM’s debts. The investment case was clear: an opportunity to give corporate backing to one of the City’s most high profile fund managers.
group suffered a disappointing 2014 Shares in the group suffered a disappointing 2014. The sale of one arm of the business, the retirement of a key fund manager and the poor performance of a collection of funds led to a large amount of customer monies leaving the company. The aggregate effect of these changes was that £1.4bn of funds left the company’s management. The economics of a fund management firm are straightforward. Revenues increase proportionally when www.aimprospector.co.uk
assets under management rise. If a good return can be made on those funds, then assets under management increase further. Strong investment returns will attract more funds away from the competition. Of course, if this runs in the other direction, profits can fall hard.
Strong investment returns will attract more funds Assets under management, and the outlook for this sum are the main determinants of a fund management group’s share price in the long term. Therefore, when investing in such a company, I would always take a view on the outlook for global stock markets. With a smaller group such as Miton however, large changes in assets under management can occur independently of the broader market. Although assets fell hard in 2014, there is the possibility that a star fund manager may be recruited. Such an event would likely push the shares significantly higher. Management’s ability to attract new funds organically is also of note. In 2014, £708m of new funds were brought under management. It is hoped that Miton’s UK Multi Cap Income fund will play a role in developing the business in 2015. Consistent top quartile performance
here is expected to attract more assets. Another exciting prospect is the UK Value Opportunities Fund. According to Hargreaves Lansdown, this fund delivered a 26.8% return in the year to May 2nd 2014, followed by a 14.9% rise the year after. Miton Group delivered an 11% dividend increase for 2014 and another rise is expected this year. The rating versus 2015 forecast earnings suggests that the market is expecting significant earnings growth this year. The dividend yield is respectable and the shares trade at a modest discount to book value. In the event of a wider market sell-off, the shares could present an opportunity for contrarian value investors.
an 11% dividend increase for 2014 Miton Group (LON:MGR) FOR Well-regarded team Decent yield AGAINST Unproven funds Key-person risk Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high
£47m 27p:28.5p 16.3 2.9% 19p:45p
Published on May 11, 2015
Published on May 11, 2015
Featuring nine AIM-quoted companies: Christie Group, EMIS, Fairpoint, H&T, Keywords Studios, Miton Group, NAHL, SCISYS and Universe Group.