Fund manager Miton (MGR:71p) has delivered the eye-catching half-year results I was anticipating when I suggested buying the shares, at 62p, in the summer ('Miton on the money', 9 July 2018), having first highlighted the potential, at 23p ('Poised for a profitable recovery', 4 Apr 2015).
Closing assets under management (AUM) of £4.54bn was sharply up from £3.82bn at the start of the year and reflected £616m of fund inflows evenly split over the first and second quarters. Miton has reported positive net inflows for seven consecutive quarters and you can make that eight because AUM has since kicked on again to £4.81bn. The £5bn year-end AUM target of analyst Stuart Duncan of broking house Peel Hunt is looking increasingly conservative, especially as all bar one of the 11 funds Miton manages are ranked in their first or second quartile. For example, Miton’s European Opportunities fund is the best-performing fund in its sector since launch at the end of 2015; and its US Opportunities fund has outperformed both peers and the S&P 500 since launch in March 2014.
The operational gearing of asset managers means that rising AUM has an accentuated impact on profits because an increasing amount of incremental fees drop to the bottom line. In the six-month period, Miton’s net revenues rose by a quarter to £12.8m, but pre-tax profits and EPS surged by around half to £4.4m and 2.3p, representing more than half of Peel Hunt’s full-year estimates of £8.5m and 4.2p, respectively, and that was after an 11 per cent upgrade in July. Another upgrade of 5 per cent looks on the cards. The company is cash generative, too: net cash flow from operations doubled to £4m year on year which funded a £2.1m cash dividend, £0.8m of tax payments and boosted net cash from £19.9m to £21m, or 12p a share.
So, with Miton’s shares trading on 11 times cash-adjusted 2019 forward EPS of 5.2p, and offering a 2019 prospective dividend yield of 3.4 per cent, I am upgrading my target price from 75p to 90p. Buy.
■ Simon Thompson's new book Successful Stock Picking Strategies can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. It is being sold through no other source and is priced at £16.95 plus £2.95 postage and packaging. Simon's second book Stock Picking for Profit has been reprinted and is available to purchase online at www.ypdbooks.com for £16.95, plus £2.95 postage and packaging, or by telephoning YPDBooks on 01904 431 213 to place an order. Details of the content of both books can be viewed on www.ypdbooks.com.
