Record — Launch of new EM sustainable finance fund

Record (LSE: REC)

Last close As at 21/11/2024

GBP0.63

0.40 (0.64%)

Market capitalisation

GBP125m

More on this equity

Research: Financials

Record — Launch of new EM sustainable finance fund

The announcement of the launch of the Record Emerging Market Sustainable Finance Fund in partnership with UBS Global Wealth Management brings to fruition the first of the group’s new product initiatives within its modernisation and growth strategy. The initial fund size is larger than we assumed and there is good potential for growth in the long term.

Analyst avatar placeholder

Written by

Financials

Record

Launch of new EM sustainable finance fund

Fund launch update

Financial services

30 June 2021

Price

102.00p

Market cap

£196m

Net cash (£m) excluding seed fund cash at end-March 2021

16.1

Shares in issue

199.1m

Free float

53%

Code

REC

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

18.9

47.6

158.2

Rel (local)

18.1

40.2

119.7

52-week high/low

102.0p

31.7p

Business description

Record is a specialist independent currency and derivatives manager. It provides a number of products and services for institutional clients, including passive and dynamic hedging, and a range of currency for return strategies, including funds and customised segregated accounts.

Next events

Q122 trading update

17 July 2021

Q222 trading update

22 October 2021

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Record is a research client of Edison Investment Research Limited

The announcement of the launch of the Record Emerging Market Sustainable Finance Fund in partnership with UBS Global Wealth Management brings to fruition the first of the group’s new product initiatives within its modernisation and growth strategy. The initial fund size is larger than we assumed and there is good potential for growth in the long term.

Year end

Revenue (£m)

PBT
(£m)

EPS*
(p)

DPS**
(p)

P/E
(x)

Yield
(%)

03/19

25.0

8.0

3.25

2.30

31.4

2.3

03/20

25.6

7.7

3.26

2.30

31.3

2.3

03/21

25.4

6.2

2.73

2.30

37.4

2.3

03/22e

32.0

11.4

4.76

2.30

21.4

2.3

Note: *EPS is diluted. **DPS excludes special dividends.

New fund reflects existing strengths and innovation

The Record Emerging Market Sustainable Finance Fund has been launched in an exclusive strategic partnership with UBS Global Wealth Management arm of the UBS Group, which is a longstanding client of Record. The fund size at launch will be approximately $750m, which is above our previous assumption of c $350m. While not specified, we expect the management fee to be commensurate with an actively managed fixed-income fund providing diversifying revenue and opening up a new area for growth and product development in years to come. The fund draws on Record’s longstanding currency expertise and newly developed ESG and sustainable investment capabilities. The fund aims to improve the flow of finance to projects in emerging markets by absorbing currency risk and helping stabilise EM exchange rates; for investors the fund will provide daily liquidity and the manager aims for an attractive, reliable return. An update on Record’s new strategy can be found in our note following the FY21 results released earlier this month.

FY22 estimates increased

Reflecting the higher-than-expected fund launch size we have increased our revenue estimate for the current year by 4%, which translates to a 9% increase at the level of diluted earnings per share. See Exhibit 2 for further details. As in previous estimates we do not allow for further unannounced prospective fund flows or potential performance fees.

Valuation

Updating our comparative valuation table (Exhibit 1) shows that Record trades on a premium to the average P/E and EV/EBITDA ratios for a selection of UK asset managers. The positive impact of one of Record’s new product initiatives seen in our estimate upgrade in this note is supportive as is the opportunity for long-term development of sustainable investment products and the potential for performance fees over time.

Valuation comparison

We have updated our comparative valuation table including a selection of quoted UK fund managers. The Record share price has shown further strength over recent weeks and still trades at a premium to the average prospective (calendarised) P/E and EV/EBITDA multiples, although this has been moderated by our latest estimate increase.

Exhibit 1: Comparing valuation with UK fund managers

Price
(p)

Market cap (£m)

P/E 2021e
(x)

P/E 2022e
(x)

EV/EBITDA 2021e (x)

Dividend yield (%)

Ashmore

388

2,761

14.7

14.8

10.1

4.4

City of London Investment Group

538

273

12.4

12.0

N/A

5.6

Impax Asset Management

1,164

1,543

38.3

28.9

33.5

0.7

Jupiter

273

1,507

10.7

10.2

6.5

6.3

Liontrust

1,750

1,068

17.5

14.8

12.1

2.7

Man Group

182

3,653

10.9

10.7

7.9

4.2

Polar Capital

824

825

13.4

12.1

8.6

4.0

Schroders

3,542

9,462

16.7

15.4

12.5

3.2

Average

16.8

14.9

13.0

3.9

Record

102.0

197

24.0

20.0

17.5

2.3

Source: Refinitiv, Edison Investment Research. Note: P/E and EV/EBITDA on a calendar-year basis. Record’s dividend yield excludes the special dividend. Priced at 29 June 2021.

Exhibit 2: Financial summary

£'000s

 

 

2018

2019

2020

2021

2022e

Year end March

 

 

 

 

 

 

 

PROFIT & LOSS

 

 

 

 

 

 

 

Revenue

 

 

23,834

24,973

25,563

25,412

31,968

Operating expenses

 

 

(16,735)

(17,089)

(17,996)

(19,333)

(20,563)

Other income/(expense)

 

 

173

(8)

82

41

0

Operating Profit (before amort. and except.)

 

 

7,272

7,876

7,649

6,120

11,405

Finance income

 

 

56

113

88

33

38

Profit Before Tax

 

 

7,328

7,989

7,737

6,153

11,443

Taxation

(1,182)

(1,559)

(1,365)

(802)

(2,174)

Minority interests

 

 

0

0

48

0

0

Attributable profit

 

 

6,146

6,430

6,420

5,351

9,269

 

 

 

 

 

 

 

 

Revenue/AUME (excl. perf fees) bp

 

 

5.1

4.9

4.9

4.8

5.4

Operating margin (%)

 

 

30.5

31.5

29.9

24.1

35.7

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

 

206.5

198.1

197.1

196.2

194.9

Basic EPS (p)

 

 

3.03

3.27

3.26

2.75

4.77

EPS - diluted (p)

 

 

2.98

3.25

3.26

2.73

4.76

Dividend per share (p)

 

 

2.30

2.30

2.30

2.30

2.30

Special dividend per share (p)

 

 

0.50

0.69

0.41

0.45

2.10

Total dividend (p)

 

 

2.80

2.99

2.71

2.75

4.40

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

Non-current assets

 

 

2,339

2,161

4,868

5,153

4,488

Intangible Assets

 

 

228

288

470

420

405

Tangible Assets

 

 

910

761

751

683

533

Investments

 

 

1,115

1,112

2,472

3,046

3,046

Other

 

 

86

0

1,175

1,004

504

Current Assets

 

 

29,737

31,427

31,149

28,045

32,759

Debtors

 

 

6,775

7,562

8,704

8,006

9,769

Cash

 

 

12,498

12,966

14,294

6,847

9,798

Money market instruments

 

 

10,198

10,735

7,958

12,932

12,932

Other

 

 

266

164

193

260

260

Current liabilities

 

 

(5,525)

(6,158)

(6,955)

(5,992)

(6,246)

Creditors

 

 

(2,630)

(2,736)

(3,009)

(3,426)

(4,180)

Financial liabilities

 

 

(2,467)

(2,621)

(2,191)

(1,696)

(1,696)

Other

 

 

(428)

(801)

(1,755)

(870)

(370)

Non-current liabilities

 

 

0

(29)

(901)

(407)

(407)

 

 

 

 

 

 

 

 

Net Assets

 

 

26,551

27,401

28,161

26,799

30,594

Minority interests

 

 

0

60

132

0

0

Net assets attributable to ordinary shareholders

 

26,551

27,341

28,029

26,799

30,594

 

 

 

 

 

 

 

 

No of shares at year end (m)

 

 

199.1

199.1

199.1

199.1

199.1

NAV per share (p)

 

 

13.3

13.7

14.1

13.5

15.4

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

Operating Cash Flow

 

 

2,746

7,026

6,543

6,798

9,177

Capex

 

 

(236)

(72)

(243)

(230)

(140)

Cash flow from other investing activities

 

 

7,899

(561)

1,513

(6,210)

(112)

Dividends

 

 

(6,810)

(5,517)

(5,888)

(5,290)

(5,474)

Other financing activities

 

 

(10,367)

(613)

(943)

(2,368)

(500)

Other

 

 

146

205

346

(147)

0

Net Cash Flow

 

 

(6,622)

468

1,328

(7,447)

2,951

Opening cash/(net debt)

 

 

19,120

12,498

12,966

14,294

6,847

Closing net (debt)/cash

 

 

12,498

12,966

14,294

6,847

9,798

Closing net (debt)/cash inc money market instruments

22,696

23,701

22,252

19,779

22,730

 

 

 

 

 

 

 

 

AUME ($bn)

 

 

 

 

 

 

 

Opening

 

 

58.2

62.2

57.3

58.6

80.1

Net new money flows

 

 

(1.2)

(4.5)

4.6

9.7

1.6

Market/other

 

 

5.2

(0.4)

(3.3)

11.8

0.8

Closing

 

 

62.2

57.3

58.6

80.1

82.5

Source: Record accounts; Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Record and prepared and issued by Edison, in consideration of a fee payable by Record. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Record and prepared and issued by Edison, in consideration of a fee payable by Record. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Record

View All

Financials

Record — Strong performance fees

Financials

Record — Transitional year ahead

Financials

Record — AUME momentum and a sharper focus

Latest from the Financials sector

View All Financials content

Research: Consumer

Whitbread — The strong get stronger

Confirmation of recovery ‘much broader than staycations’, backed by continued significant outperformance of the midscale and economy hotel market in the quarter to May, highlights a predictably positive update by Whitbread. That is not to play down expected ‘very strong’ demand throughout the summer at tourist locations (c 15% of the estate). While key office-based demand may not pick up meaningfully until the autumn, robust finances, brand strength and economies of scale should allow Whitbread to benefit materially on pandemic fallout (Q122 saw further estate improvement in the UK and an expanding pipeline in Germany). The delay in easing UK lockdown restrictions until 19 July does not change management’s outlook and guidance for the full year to February 2022.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free