Polar has maintained its growth momentum in H1 of FY22 with AUM reaching £23.4bn on 30 Sep 21, 12% up over the half-year (31 Mar 21: £20.9bn) and 43% up year-on-year (30 Sep 20: £16.4bn). It has already surpassed our original end-FY22 AUM forecast of £23.1bn. We also see huge potential for the new Sustainable Thematic Equities team (with newly launched Smart Energy and Smart Mobility funds) to contribute to maintaining the growth momentum.
We maintain our fair value of 1305p per share for now, almost 70% above the current share price, noting the potential for upside in this valuation given that:
- AUM and performance fee accruals are ahead of our expectations (although we remind readers that asset managers’ AUM levels can be volatile as they are correlated to market movements, and there is no guarantee that AUM will remain above our forecast); and
- The potential exists for the new Sustainable Equities team to overshoot expectations on the upside. The team is well known, highly experienced and previously managed €5bn AUM. It will also be operating in a booming market (in Europe, sustainable funds attracted 47% of all fund inflows in calendar H1 21, according to Morningstar).
Also noteworthy is the continuing discount in Polar’s share price compared to peers. Its PE ratio of 11.4 is far below the peer group median of 29.0. This is despite Polar being a notable performer on a multitude of metrics – including investment performance, AUM inflows, revenue generation, operating profits, and dividends compared to peers (refer to our initiation note of 13 Sep 21 for details). There are sound reasons for a significant change in its rating.
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