Market's view on Assetco
Published on April 2024
- Preservation Capital is reportedly looking to sell its majority stake in Parmenion, valuing AssetCo’s 30% stake at £75mn-£90mn, which is significantly higher than its book value of £24.6mn.
- Despite a decline in share price since the last analysis, AssetCo’s investments and cash reserves are considered to be worth significantly more than the company’s market capitalisation.
- AssetCo has transformed from a company with no underlying business in 2020 to an asset management business with approximately £2.5 Billion in assets under management (AuM).
- The company’s strategy involves acquiring small active equity managers, aiming for an operating margin of around 20-30% following integration and cost reductions.
- AssetCo has made several acquisitions over two years, including a misstep with the purchase of Rize ETF which was sold at a loss.
- There are ongoing rumours about the potential sale of Parmenion, which could lead to a significant re-rating of AssetCo’s stock.
- AssetCo’s financials show a struggle with cash burn, with anticipated financing needed within two years unless cash flow turns positive as management expects.
- Criticism exists regarding AssetCo’s strategy of acquiring small firms at premium prices, questioning the scalability and return on investment.
- Comparisons with peers like Premier Miton show AssetCo as underperforming in revenue generation and cash flow despite its lower enterprise value.
- There’s scepticism about the company’s momentum and efficiency, highlighted by its high administrative expenses and minimal business synergies.