Solid year despite market dip paring AUM in Q4

The market turbulence of the first quarter of 2022 (Q4 of Polar’s FY22) has taken some of the shine off an otherwise strong year. But only some of the shine. While Q4 saw a £1.9bn or 8% drop in AUM from £24.0bn on 31 Dec 21 to £22.1bn on 31 Mar 22, over the full FY22 (Apr 21 to Mar 22) AUM grew £1.3bn or 6% (end-FY21: £20.9bn).

The dip in AUM makes only a small difference to our FY22 projections. As revenue is mostly a function of average AUM throughout the year, it is not hugely sensitive to a drop at the end of the year. And Polar’s performance fees mostly crystalise on 31 Dec, so those were largely ‘locked in’ before Q4. We now estimate revenue to grow by 8.5% in FY22 to £219m, and core operating profit to grow by 26% to £65m (profit before tax, performance fees and exceptional items).

With FY23 starting off from a lower AUM base than previously projected, our estimates going forwards have been reduced a little more significantly, and our fundamental valuation is now 1,000p per share, still 64% above the current share price, but down from 1,400p. We also highlight that Polar trades on a PE ratio of just 9.1, around half of the peer group median of 18.0, which we do not think is justified given its track record, strategic positioning, and growth prospects