Canaccord stays at 'buy' on Gresham House, highlights uncorrelated asset exposure

In particular, the Canadian broker hailed the rate of increase in the firm's funds under management on an organic basis in the backhalf of 2019 which it said suggested upside versus its own forecasts.

"As well as its ESG attractions, the alternative, uncorrelated nature of its real assets exposure means that GHE occupies more than one structural sweet spot, in our view, and should continue to take advantage of increasing allocations," analysts Justin Bates and Portia Patel said in a research note sent to clients.

It was that lack of correlation to which they attributed the fund manager's FuM growth.

"We believe it is extremely well positioned to benefit from the ever-growing quantum of capital seeking ESG-compatible investment opportunities," they added.

From a valuation point of view, at 21.8 times their estimate of the firm's earnings for calendar year 2020, the share price did not "fully recognise" the inherent value of the business, the analysts also said.

The then current share price also suggested that investors needed to take into account the company's strong balance sheet.

Their target price of 801.0p was based on an average of the estimated end-2020 EV/EBITDA multiple for the firm of 20.0 together with 1.0 times the company's estimated end-2020 net cash and realisable assets (target value: 909.0p), and 1.0 times its end-2020 net asset value plus 4.0% of its end-2020 FuM (target value: 694.0p).