Brooks Macdonald & wealth management sector looking undervalued?
A well-flagged sluggish quarter for BM, but price fall of company & sector looks overdone
I published my Equity Development research note on Thursday last week covering Brooks Macdonald’s funds-under-management update for the quarter ending 30th September 2023.
“FUM increased marginally from £16.85bn on 30 Jun 23 to £16.86bn on 30 Sep 23. As flagged in the FY23 results release of 14th Sep 23, net flows were slightly negative for the quarter at -£70m, although BM has indicated it expects positive flows for the whole of FY24.
It’s important to keep this small negative quarterly net flow number in context: it follows nine consecutive quarters of positive flows (achieved despite difficult market conditions) and a period where BM recorded a higher organic growth rate than peers for 6 out of 8 quarters.”
You can read more details in the full note at this link: Well-flagged sluggish quarter but price fall looks over-done.
The note goes into some detail of how wealth/investment managers’ share prices have been battered over the last 18 months or so, and in my view, are looking undervalued. Extract from note here:
And I highlight that large foreign wealth managers were already seeing substantial value in UK acquisitions when prices were a lot higher. When the acquisition of Brewin Dolphin by RBC was announced on 31 March 2022, its PER jumped from 16.9 to 27.2, a premium of 62% to its share price the day before the deal was announced.
“They are surely seeing even more value now”
Then bizarrely, on Friday, Reuters ran this article: “Brooks Macdonald lines up defence adviser amid takeover interest, sources say”.
The price jumped over 6% on that day.
Interesting times in the wealth management space. Be sure to subscribe to this newsletter to keep up to date with the latest results in the asset and wealth management sectors (there will be quite a few posts over the next few weeks as quarterly updates are published for the Jul-Sep 23 quarter).
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Disclosure: At the time of writing, Paul Bryant was a shareholder in Brooks Macdonald and covered Brooks Macdonald as an analyst on behalf of Equity Development Limited. Read all of Equity Development’s research on Brooks Macdonald as well as interviews with management at this link. (Please read this link for the terms and conditions of reading Equity Development’s research).