Mattioli Woods thrives and still offers value for investors

The share price of Mattioli Woods (MTW) is little changed over the past 12 months, which is somewhat surprising given both the wealth manager’s absolute and relative performance compared with peers, at least those towards the top of the food chain. Although gross discretionary assets under management (AuM) fell by 6 per cent to £4.8bn in the year to 31 May, the group registered net inflows of more than £68.1mn in the period.

There wasn’t much Mattioli Woods could do to counter the broad-based asset price falls over the past year – there have been few hiding places for investors. But the proportion of revenue generated by managing pension capital and/or discretionary investments provides a degree of insulation against market volatility. Indeed, recurring revenues account for 90.9 per cent of the group total, up from 86.8 per cent in the prior year. The prevalence of time-based fees uncorrelated to market performance also stands as a plus point when investment markets are under pressure.

And despite the bumpy road we have been on, the group’s total value of new client wins increased by 14.6 per cent “reflecting business development initiatives” and helped along by “synergies with acquired businesses”. We can expect more progress on this front in FY2024, as the new business pipeline is apparently in rude health.

Fans of the stock probably find encouragement in the 'small is beautiful' mantra. And there is still value on offer. A consensus forward rating of 12.6 times forecast earnings is complemented by an enterprise/cash profit multiple of 7.6 (and falling). There is also a 4.5 per cent prospective dividend yield into the bargain. Buy.

Last IC View: Buy, 627p, 7 Feb 2023