- Business has a top asset management team.
- Net cash backs up a third of market capitalisation.
- Discount to sum-of-the-parts valuation.
It’s sensible to build a ‘margin of safety’ into the price you are willing to pay for any investment. Risk can be mitigated further when the company is sitting on a cash pile to cushion potential downside. In the case of one asset manager, balance sheet cash backs up a third of its market capitalisation. Moreover, the group’s 30 per cent stake in a profitable investment platform is worth 50 per cent more than its own market capitalisation.
Investors also get a free ride on an asset management business with around £3bn of client mandates which is being right sized and could hit run rate profitability in 2024.
