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Impax has the wind in its blades

Shares in sustainability-focused asset manager hit a fresh high after disclosing new surge in net inflow
December 3, 2020
  • Full-year results highlight surge in assets under management
  • Post-period has seen £1.9bn net inflows in two months
IC TIP: Hold at 618p

To Impax Asset Management (IPX) chief executive Ian Simm, this year’s pandemic has raised three issues to the top of investors’ agendas: rising risk, the dislocation and dematerialisation of the economy, and the state of  international co-operation.

Given its focus on sustainability, the active fund manager has been pondering these questions for longer than most. Recent evidence suggests this has been highly prescient.

Impax’s share price, which has doubled in 2020, touched a fresh high on the publication of full-year results, after the group disclosed a further £1.9bn of client net inflows in the past two months. At the end of September, assets under management stood at £20.2bn.

If that rate continues throughout the current financial year, asset growth will exceed 50 per cent. Put bluntly, this sort of growth does not happen in the normally gradual world of fund management.

Then again, strong reputation and distribution deals – including an updated agreement with long-term shareholder BNP Paribas – are proving advantageous. Mr Simm’s prediction of a “Keynesian re-stoking of the economy” in favour of green assets could help further.

Signs of growing investor appetite in the sector were further underlined in the period by the entry of JLEN Environmental Assets (JLEN) into the FTSE 250. The environmental infrastructure fund, whose investment portfolio includes stakes in onshore wind, PV solar and waste-water processing projects, has seen an 8.5 per cent annualised share price return since its 2014 initial public offering.

It's results for the six months to September, which landed a week before Impax’s numbers, showed the direction of travel is not one-way, as a reduction in long-term electricity and gas price forecasts drove a decline in net asset value from 97.5p to 96.1p per share.

Impax’s net asset value, by contrast, is up 13 per cent in 12 months. Buffered by two tailwinds – surging investor appetite for more sustainable investments, and an increasingly favourable political and financial support for those investments – it is likely shareholder equity will climb in the coming year.

Whether the shares can maintain their momentum is a tougher question. Consensus forecasts anticipate earnings will rise 23 per cent to 17.8p per share for the year to September 2021, though even this translates to record-high valuation multiples against the current share price.

So long as the group is adding almost £1bn in assets each month, this is probably justified. But on balance, we think peer Liontrust Asset Management (LIO) trades on a more reasonable valuation, despite an equally strong growth outlook. Hold.

Last IC View: Hold, 382p, 15 Jul 2020

IMPAX ASSET MANAGEMENT (IPX)  
ORD PRICE:618pMARKET VALUE:£805m
TOUCH:582-618p12-MONTH HIGH:618pLOW: 191p
DIVIDEND YIELD:1.4%PE RATIO:58
NET ASSET VALUE:54.8p*NET CASH:£9.6m
Year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201621.15.203.62.1
201732.75.856.52.9
2018**65.711.49.04.1**
201973.718.912.25.5
202087.516.710.68.6
% change+19-12-13+56
Ex-div:18 Feb   
Payment:26 Mar   
*Includes intangible assets of £33.2m, or 25.4p a share. **Excludes HY special divi of 2.6p per share.