Tatton Asset Management was founded in 2007 and provides three services to smaller, UK-based Independent Financial Advisers: discretionary asset management; regulatory and compliance consulting and outsourcing; and mortgage and protection insurance aggregation.
In October, we upgraded our forecasts and fair value based on higher-than-expected AUM at the end of H1 (£10.8bn on 30 Sep, +38% y-o-y), with net inflows being particularly strong (£652m, 99% up on H1 21), and a growth outlook boosted (primarily) by a new distribution agreement concluded with Fintel plc - which provides access to 3,800 intermediary firms.
Tatton’s interims confirm our projected strong H1 performance. Short-term growth momentum continues with AUM reaching £11.2bn on 12 Nov. And progress on the Tenet partnership (incepted 2019) show a ‘snowball’ growth effect kicking in, which reinforces the medium-term potential of the Fintel deal, and supports our forecasts.
In March 21 (AUM: £9.0bn), Tatton outlined a plan to reach £15bn AUM in three years. It targeted £1bn of organic net inflows per year and had a healthy M&A pipeline. Today, with such strong inflow momentum, and in particular the huge potential of the Fintel distribution deal, we think it could hit the target without further acquisitions. On this basis, our fair value is 560p per share.
This value has potential to increase if further value enhancing acquisitions are executedand/or if organic growth exceeds expectations. In addition, given its growth prospects, we don’t consider Tatton’s forward PE (adjusted) of 29 to be particularly demanding.