Impax Asset Management – overvalued?

For the background to the company and my valuation methodology, please see my earlier article.

At the time of writing Impax is trading at 360p with 130.4m shares in issue. Thanks to the recent annual results we know that assets under management on 30/11/2019 were £15.7bn, valuing them at 3.0% of AuM. This is at the very high end of their trading range and a level at which historically the best course of action would have been to sell and buy back later.

The world has moved on since the end of November, but it is possible to make some quite accurate adjustments to compensate for this:

  • Their funds broadly track the S&P 500 over the short term and this index has risen from 3141 to 3168.
  • Thanksgiving and now Christmas will have an effect on the level of new mandates, but there have been no adverse developments and so inflows can be assumed to remain positive.
  • Few of their assets are likely to be invested in the UK and there has been a rise in the pound across a broad spread of currencies – it now buys 1.20 EUR and 1.34 USD versus 1.17 and 1.29 respectively at the end of November. This reduces funds and profits reported in pounds.

Overall these factors lead me to me estimate current AuM slightly down at £15.5bn, not a significant change.

It is clear that the results were well received, in particular the change in dividend policy, the very strong start to the quarter in terms of inflows and perhaps a brighter outlook that has been seen of late. While it is understandable that these would have buoyed sentiment, history suggests that it is best to concentrate on the simplistic valuation and ongoing falls in management fees rates continue to pose a long-term headwind.

What is less understandable is that a US fund manager and foreign exchange earner that just happens to be quoted in the UK would have benefited from last week’s election result. I believe that the strong move on Friday tells us more about the investor base of Impax and their sentiment than the companies prospects.

Having bought at 244.5p in July I sold out a few days and 10% too early at 332p, but my greatest mistake was not buying more back in July.

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