Bradda Head Lithium exceeds targets, secures US$3 million royalty and moves closer to production. Watch the video here.
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Equity Development initiates coverage today on Mercia AM as they announce a strategic shift to focus on highly profitable and fast growing fund management
Full research report with audio summary here: https://www.equitydevelopment.co.uk/research/a-deeply-undervalued-specialist-in-private-markets-1
"A deeply undervalued specialist in private markets"
Mercia is one of the largest investors in ‘regional’ (ex-London) UK growth businesses. Its primary focus is managing funds of around £1.6bn for third parties (FUM) in structures such as Venture Capital Trusts, EIS funds and funds for institutional investors. The business is scaling. FUM has more than doubled in two years. Record net flows exceeded £0.5bn in FY24. And growth is by far the highest among a London-listed peer group.
FY24 revenue grew 18% y-o-y to £30.4m, EBITDA 7% to £5.5m, a margin of 18.2%, likely to ratchet up over the longer term as the business scales further. Indeed, the newly announced Mercia 27:100% growth strategy aims to reach £3bn AUM (FUM + proprietary capital) and £11m EBITDA in 3 years.
Mercia also invests its own capital into a portfolio of ‘direct investments’ (NAV: £189m on 31 Mar 24). Its record is impressive.
A strategic change is to be proposed at the 2024 AGM - to focus primarily on highly profitable and fast-growing fund management, and to stop making new direct investments (while supporting existing investments). This allows Mercia to reclassify from an investment company to a trading company under AIM rules, allowing gains made on shares to be IHT-exempt (under certain conditions).
With a fundamental value 65% above the share price, we see potential for a significant rerating.
Mercia Asset Management PLC (AIM: MERC), the proactive, regionally focused specialist asset manager with over £1.5billion of assets under management, re-confirms that it will announce its preliminary results for the year ended 31 March 2024 on Tuesday 2 July 2024.
Will they allay lingering fears and put Marc back on track?
Loss of 2p I make that a decline of 4.4% of NAV
ie not so small
Merc. sp holding up well despite yesterdays bad news concerning Impression Tech. :-
Mercia Asset Management PLC (AIM: MERC), the proactive, regionally focused specialist asset manager with over £1.5 billion of assets under management, announces that it has made the decision to cease further funding for one of its direct investments, Impression Technologies Limited ("ITL").
Mercia first invested in ITL via its thirds-party funds in 2014 and it became a balance sheet direct investment in 2015. During the period of Mercia's investment, ITL developed its novel Hot Form Quench ("HFQ®") technology, established a low volume manufacturing facility, secured its first production customers, signed licences with several automotive sub-contractors and developed its technology to be transferable across industry sectors e.g. aerospace.
However, despite this considerable technological and commercial progress, ITL has been unable to reach breakeven. As announced on 28 November 2023, Mercia reduced its direct investment carrying value in its interim results, reflecting increased uncertainty following a sale process which did not ultimately succeed. Since that time, ITL has continued to explore options including further funding or a sale. Ultimately however, no successful new external funding or a sale of ITL has been achieved. Given that ITL's pathway to profitability remains highly uncertain, Mercia has also decided to cease further funding. It is now anticipated that ITL will enter into an insolvency process in the near future.
Mercia will now reduce the carrying value of its investment in ITL as at 31 March 2024 to zero, resulting in a small reduction in the Group's net asset value per share of c.2 pence, compared with the net asset value per share of 45.3 pence as at 30 September 2023
Share price has enjoyed a good run over the past month and no pumpers & dumpers on the BB which is a relief! The value proposition for owning more MERC shares seems strong according to Schanhorst. Inclined to agree, will add more this week.
I’m expecting a bid at some stage. Big cash pile, good reputation, assets under management growing fast, well positioned for UK turnaround, especially with our British Business Bank relationship. That is meaningful. Like us, Maven were recently awarded BBB contracts. Maven were taken over by Mattioli Woods in 2021 and they are currently being taken over by Pollen Street Capital. Things are moving.
Very good results, surprised the sp not higher.
Brilliant Scharn, thank you. Really appreciate the information and I totally agree Ray sounds like the type of guy any company and investor would be proud to have on their side. Now I know, I am. Kind regards, MIG
You’re welcome MiG. Ray Chamberlain was non-exec chair of Mercia at IPO and is a staunch supporter. He was executive chair and main shareholder of Forward Group plc which was successfully sold in the 90s. The name lives on in Forward Innovation Fund and Forward Nominees which are listed in the MERC Annual Report as significant shareholders in Mercia and in which Ray has an interest. I don’t know how many shares Ray holds directly in Mercia but I’m told he has never sold a single share in the company. I’ve met him, he’s a very nice bloke and passionate about encouraging small and medium sized companies in the regions. The UK needs more like him imo.
Thanks Scharn, exact as usual and completely correct. The RNS here is more accurate than where I saw it. Apologies FEP if my note didn't help. All the best guys, MIG
The director didn’t sell shares.
The Shares were sold on 21 March 2024 at 32.50p per share by non‐Chamberlain family shareholders. None of the shares sold were held personally by Ray Chamberlain.
Hi MiG thanks for the response, I did not appreciate he held that many shares! As you say the prev RNS very encouraging and I am starting to think this is a long term hold.
Hi FEP, looking at previous sales he had done these before in Feb/Mar perhaps for taxes? As he still has 60m shares I wouldn't worry, especially as Mercia, their recent news and their brokers targets seem to be very positive IMHO. Regards, MIG
Director sells shares....not so great, could be good personal easons for doing so?
Indeed, 2 brokers have appeared to upgrade estimates already, one described it as "hitting sixes".
Let us hope shareholders see some of it, personally I'd be happy just with a boundary hit...
Good news, a sizeable chunk of money imo.
Buyback has reaches just under 9 million shares, and Mercia could keep buying until they reach around 16.5 million, as they did announce "a share buyback programme of up to £5.0million".
Volume has picked up in recent days with the share price beginning to tick up. Perhaps supply of cheap shares is running out? It's possible some further good news is brewing, and Mercia are keen to accelerate the buyback programme before the news flow is ready. to be released.
Let's hope we are at the start of a sustained rise and some positive news flow lands to help drive the share price into the 40's.
I’m surprised by the muted market response here. Fund managers pretty much across the board have had outflows for around two years now.
Not only did they manage minor inflows in their H1 results, they’ve now added over 10% in one fell swoop. Talk about bucking the trend.
You can tell from share buy back profile over time that they're mopping up weak PIs. It's beneficial for me that shares are bought back well below NAV so no complaints. Times might be hard for some but it hasn't stopped Mercia closing out the Northern Venture Trust offer which is fully subscribed for £14m plus £6m extension. I expect NVT2 and NVT3 to follow suit.
Hi JS, (my thoughts, but of course they could be wrong!) with Mercia buying back its own shares I would think that may support the shares a bit, but with the various cost of living increases at present, especially re-mortgaging, that counterbalances that. The FT Weekend also had various little bits of info such as bonuses not going towards VCTs, which again could affect Mercia, at the moment. Unless Hunt comes up with something in the March budget to help the UK market and general spending, the technical recession bites. Won't ever give up on Mercia, as they have everything in a share I and my family value. People in trouble sell things in the market that are easy to sell. May be shares like Mercia. Give it a year and I'm convinced they will recover. Good luck all, especially JS and Scharn. Best, MIG
Given history of nervous holders cashing in
expect this dip to ?27p
Thanks for the clarification MIG. Resolution 11 at the agm gave them the authority to repurchase up to 10% of ordinary shares so they’re operating within that remit. When you put your figure up I wondered if our directors thought there was a chance the share price could drop to 9p. Nothing will surprise me in this market for small caps but I hope to put that thought away along with the mauser. Have a good one.
Hi Scharnhorst, my figures are from the Share Buyback Programme RNS of the 28Nov23 where Mercia mentioned £5m and a maximum of 44,658,120 shares - though at a purchase price of 30p that would only be 16.7m shares bought....and a Happy New Year! MIG
Barchid Scharnhorst : And a very merry Santa to you also. So we end the year down to 29p from 33p Doh..!
It's been a funny old year , well it could have been, but as of 8 November 2023 possession of nitrous oxide, also known as ‘laughing gas’, has been made illegal. I think it was something to do with people consuming balloons full of instant whipped cream & choking to death ? People just don't read instructions anymore.
https://www.thefactsite.com/year/2023/#:~:text=The%20Doomsday%20Clock%20was%20set,since%20its%20creation%20in%201947.
So nearly the end of the "Water Rabbit" ? and the start of the "Wood Dragon" both of which have never appeared on any of Attenborough's offerings (must do better Sir David). Have a Cracker … 👍 💧🐇 🎈
Scharnhorst
And a very happy Santa period to you too although I doubt many Norwegians (Quislings excepted) would agree with me !
Boards would though, I'm sure...