Hannam & Partners

Hannam & Partners Financial Services Weekly – 7 November 2024 Plus ça change, plus c’est la même chose: 1.     It’s the economy, stupid. Negative real wage growth leads to voter anger. 2.     Tariffs are paid by consumers - a major future inflationary concern 3.     Queen Anne remains the USA’s last female head of state. Government bond yields rise again over here and over there, with the UK 10Y gilt now yielding 12bp more than the US (chart below). The move in only six weeks is remarkable; all the more so since the US treasury is +70bp since the Fed cut rates -50bp on 18 September. Market reactions to President Trump’s election have been sanguine across most asset classes, with equities up big time, USD at the highest level since July (DXY +1.3%) , VIX down to 15.8. The bond market’s anticipation of the possible impacts of higher inflation/ lower taxation is the move in the other direction, with the Committee for a Responsible Federal Budget having estimated that Trump’s mix of tax cuts, tariff hikes and higher spending would add $7.75 trillion to the national debt over ten years versus the prior administration’s path. Our own election brought in a government whose budget “delivers a large, sustained increase in spending, taxation, and borrowing.” (Source: OBR) with “the size of the state…forecast to settle at 44 per cent of GDP by the end of the decade, almost 5 percentage points higher than before the pandemic.” What happened to savings flows as a result of understandable fears over higher taxation? UK equity funds saw -£2.7bn of net outflows in October (passive +£0.6 and active -£3.3) as CGT fears drove investors out. 36% of these outflows were from funds investing in UK equities and another 27% from equity income funds, which are also heavily UK-weighted. Market moves since the start of the quarter have also been a net headwind, with UK wealth management assets needing a -0.5 to -1.0% mark-to-market. Combine this with a rising risk-free rate and you see underperformance, relative to the market, across financials subsectors. Note that several banks have been further impacted by the 25 October Court of Appeal judgment which has led to many lenders suspending their car finance businesses. Lloyds is off -11% since the judgment and Close Brothers -40%. We wait on the Supreme Court. Also: Wise +14% since the start of the month/ Schroders - Q3 terrifies/ Payments tech. + Trading platforms = more money/ CMC Markets - white label deal with ASB Bank in NZ. / TP ICAP +10% since results which led to low SD upgrades in the out year, higher in 2026E. https://lnkd.in/eHr_TyAf

In this week’s #sustainableenergy rundown:   - Lucid Motors raised $1.75bn to help fund the business through launching its electric SUV - Vistra Corp. acquired 15% equity interest in Vistra Vision held by Nuveen, a TIAA company and Avenue Capital Group for c. $3bn - KKR announced a deal to acquire a 25% stake in Enilive, Eni’s mobility transformation company focused on biorefining, biomethane production and smart mobility solutions   Other M&A and capital raising news from Cubico Sustainable Investments, ArcLight Capital Partners, Vesper Infrastructure Partners, DHL, Woodside Energy, Redaptive, Inc, Advent International, Urbint, BP Energy Partners, and more.   #energytransition #decarbonization #electricvehicles #energystorage #renewableenergy #hydrogen #batterystorage #esginvesting #solarenergy #biofuels #energystorage #carboncapture

Hannam & Partners Financial Services Weekly – 30 October 2024 Could have been worse, is what the equity market seems to have discounted, with the FTSE250 up a little after the Budget. As for gilts, a significant spike in the 10Y, which, with such great issuance to come this year, is a major concern. IHT on DC pensions inherited is not as negative, for either savers or the wealth management industry that facilitates their investments, as the mooted ending of higher-rate tax relief or reduction in tax-free lump sums. Taking business property relief for inherited AIM shares to 50% from 100% is not the destruction feared, and the index has already underpeformed DD (see chart). CGT up from 20% to 24% is material. The bedrock of the economy, SMEs, will be hit by higher minimum wages and the cut in the employer National Insurance Contribution threshold from £9.1k to £5k. Hargreaves Lansdown platform net outflows of -£0.3bn in the quarter to end September, after +£0.9bn in each of the two preceding quarters. AJ Bell saw +£1.0bn net inflows in its D2C platform in this quarter, and Interactive Investor (part of abrdn) +£1.2bn. HL needs to reprice. abrdn Q3 net flows of -£3.12bn missed consensus of -£1.0bn. The stock is now 17% down on pre results, at 135p, and trades on 11.3 x 2025. Plus500 Q3 saw revenues +1 Cash still at $950m. Profits continue to be suppressed by the opex investment in the US, which is likely to be disclosed with FY results. Equals Group has a new 135p bid from the consortium, which the market half-believes, with the stock +10% to 123p. Close Brothers/ NatWest/ FCA and Discretionary Commission Arrangements The Appeals Court ruling of 25 October sent Close Brothers down another 36% to -70% YTD. All eyes, including those of the FCA, turn to the Supreme Court, which will hear the appeal. https://lnkd.in/eHfYYWwZ

In this week’s #sustainableenergy rundown:   - Amazon led a $500m investment and offtake with SMR developer X-energy - Blackstone announced plans with the regional Spanish government to invest €7.5bn to develop data centers in Spain’s Aragon region - T. Rowe Price and GE Vernova led an investment of c. $400m in Form Energy   Other M&A and capital raising news from Equilibrium Energy, MidCentral, Noventa Energy Partners, Eni, Meta, ExxonMobil, bp, CorPower Ocean, Macquarie Group, and more.   #energytransition #decarbonization #electricvehicles #energystorage #renewableenergy #hydrogen #batterystorage #esginvesting #solarenergy #biofuels #energystorage #carboncapture

H&P Financial Services Weekly - US 10Y up 62bp since mid September! 📈 Remarkable macro moves, with US treasuries spiking even as the Fed indicates rates are on their way down. 🤷♂️ Combine this with gold up 34% since the start of March and it rather looks as if, while, for now, equity volatility is low, faith in the world’s financial powerhouse, the US, is wobbling at a time of high market valuations. 😟 Moneybox is now a profitable business with £26m PBT in the year to May, and AUA of £10bn, more than doubling yoy. 🚀 It is succeeding where so many other robo-advice and D2C wealth businesses have failed, and has now raised £70m from two new investors. Evelyn Q3 (chart below) shows it is still growing, though mostly driven by Professional Services. Leveraged Trading We note Robinhood’s entrance into the UK market. DNB buys Carnegie for $1.1bn or 2.8% of AuM. Plus Klarna in The Sun, and Alpha Group showing the way on return on client cash disclosure. https://lnkd.in/gi4ZMmK8

It's a macro-swerving week for the H&P Financials Weekly. Here we have charts of US public debt, and then, on the right, the UK marginal tax rate for a graduate. Both are insane and depressing, so instead we go full micro, hardcore fundamental, giving you a Results/ Estimate changes/ Valuation/ Conclusion analysis of pretty much all the financials which have reported this week: AJ Bell, Brooks Macdonald, IntegraFin Holdings plc, Quilter, Rathbones Group Plc, St. James’s Place, Tatton Asset Management plc, ASHMORE GROUP PLC, Jupiter Asset Management, Liontrust Asset Management PLC, Man Group, Ninety One, Polar Capital, Premier Miton Investors, Arbuthnot Latham. Seek and ye shall find value which will outlast the budget. https://lnkd.in/eNu6qmm8

Hannam & Partners is pleased to have acted as Financial Advisor and Co-Manager on the placing of C$192m for Allied Gold Corporation. Congratulations to CEO Peter Marrone & The Allied Gold Team.   On the 8th of October 2024, Allied Gold announced the closing of its overnight marketed equity raise of C$192.2mm through the issuance of 62m shares at a price of C$3.10/share, excluding a 15% greenshoe option granted to the Underwriters. The funds will be principally used for the development of the Kurmuk mine in Ethiopia and phased expansion of Sadiola in Mali, which should drive a doubling of production between 2023 and 2029 to almost 730koz, with a 40% decline in AISC to <US$900/oz. Allied is trading at 0.3x NAV compared to the peer group at 0.95x. We believe this discount is unwarranted given the growth profile, exploration potential across the portfolio, and the signing of the draft protocol with the Malian government that should resolve the outstanding issues in the country.   Link to Announcement: https://lnkd.in/ebfWqF2N

Hannam & Partners Financial Services Weekly – 9 October 2024. China overpromises and underdelivers, with wild gyrations that, combined with the alpha wrecking ball that is Nvidia, are making it even harder for active managers to perform. UK house prices are back up to near all-time highs (nominal), and yet UK fund flows have taken another turn down (see Calastone data below) as the government strikes fear and doubt into savers and investors. In comes the FCA with a new review of wealth management consolidation. The following day, out comes Brooks Macdonald with just one of those moments of wealth management consolidation. Its own joint broker claims it paid 16x, but this is totally wrong, and not in the direction you would think. We explain why. And we cannot resist small but mighty DF Capital on 0.4x P/TBV with already a 10% ROE, and growth... https://lnkd.in/eVD4jAwf

Last week, Power Nickel (TSXV:PNPN) released a second batch of impressive assay results from summer drilling at the Lion Discovery Zone. Lion is a polymetallic discovery with high grades of both copper and PGMs, sitting on PNPN’s Nisk licence in Quebec, 5km from the Nisk Main nickel deposit. Of particular note, hole 70 (released Oct 3rd) is the best result to date in terms of grade-metres, returning 32m @ 8.4% CuEq† (with 3.6% Cu and 8.1g/t Pd), suggesting higher grades than previously encountered and that mineralisation may be thicker on the western side. Meanwhile, results released on 1st Oct added to the understanding of the limits to mineralisation, with PNPN hypothesising that Lion could regain thickness on the other side of a fault to the east, potentially greatly increasing its scale vs initial expectations. PNPN expects assays from remaining summer holes this month, with a fully funded 30,000m winter programme commencing on 15th Oct. Access our full report, with updated valuation, here: https://lnkd.in/gxG63rrQ Roger Bell #nickel #copper #pgm #quebec #canada #investment #mining #miningexploration

H&P Financial Services Weekly - Hong Kong’s Hang Seng is the Number One Super market of the week, up > 30%, driven by lower rates and new liquidity. We look at intraday volatility in Q3, which was up on Q2, with that major August spike, which should have helped the leveraged trading platforms PLUS, IGG and CMCX. Rising markets will have added some c. 3% to UK wealth management assets last quarter. Brooks Macdonald estimates are still woefully out of date, in our opinion. Premier Miton reveals more of their MPS plans. Man Group presents an entry point, with AHL underperforming for a while. Tavistock flies on a major disposal which will nonetheless benefit acquirer Saltus. Frenkel Topping would not be at this valuation if it had any liquidity. https://lnkd.in/eDVaAAV5