MAM pulling the trigger yesterday and actually using the buyback for the first time. 78k of shares at 93c.

Good signal to go along with director making meaningful purchases last month.

Last year MAM had a Record operating profit of 17.2m, Todays update shows they have just done 13.6m in the first 4 months.

Enterprise value likely just a touch over 100mil currently… How cheap would you like it? I doubled my holding in my real portfolio during the month at 90c and it currently my largest holding by some margin.

To think people on twitter are getting into heated debates of late about what’s a better buy MFG or GQG when this thing is staring them in the face absolutely printing cash. Haha.

So 2020 was a record year for MAM with operating profit of 16.9mil They just announcend this morning that they have done nearly half that (8.2m) in the first 2 months!

Sometimes the market gives you a gift, MAM has sure felt like a gift to me. Picked up some more this morning.

MAM 80c wall that sat their for weeks and was likely old IPO holders is now officially gone.

Time test my theory, Which is I don't think there will be too much resistance from sellers now and when the company realses a bumper report due any day along with a boost in dividends and solid August update it will be a quick rerate higher.

In addition to my MAM bull case straw earlier, there may be some interesting psychology at play here as well.

There is a wall of stale liquidity at 80c which has been there since last week. Meaning who ever placed the sell orders has not adjusted it and likely may not have even read this morning’s update.

80c is a round number which is a magnet for liquidity, but more importantly it is the IPO price. People love the old adage I will sell as soon as I recover my money. Well for a lot of the investors underwater in this one that is at 80c.

I think once todays announcement is digested by the market, that 80c level will get taken out and it could face very little resistance after that and cruise higher.

I bought this on Strawman last week but didn’t post a straw as I was still trying to pick up as many as I possibly could!

Today’s update confirms a lot of what I was expecting. FUM growing to 550mil and a very strong June result. They are in great shape here and look very cheap IMO. Here are my notes from when I was buying last week.

Microequities Asset Management Group Limited (MAM) is a boutique value driven Fund manager specialising in micro and small caps I have followed their funds for years and they are good stock pickers IMO.

Not to be mistake with buying a fund or LIC, this is a fund management business where you share in the profits created by the management fees.

-Stable annual revenues of ~1.6% of total FUM from management fees.
-Lumpy revenue from performance fees.
-expenses are fairly steady and should represent a smaller percentage as FUM continues to grow.

Fees are accrued at the end of each month. 

They do not use an equity benchmark hurdle for the majority of their funds but rather an absolute benchmark of 5% p/a. 

This is a very soft benchmark that should generate meaningful performance fees. 

Essentially their hurdle is 0.42% per month. Any performance above that and they receive approximately 18.2% in fees providing the fund in question is making a New High-Water mark.

Performance fees are lumpy in nature, but if you smoothed them out over a 5–10-year timeframe, I would estimate the expected value of the revenue generated by performance fees each year to be about 1.7% of FUM. Looking at it this way and adding the expected value of the two revenue streams it starts to look cheap on a variety of multiples.

June was almost certainly a bumper month for performance and all 4 of their funds are currently making new highs meaning every dollar of outperformance will accrue performance fees at the moment. Buying now offers a high probability of locking in further immediate revenue from performance fees in the coming months.

Coming News Flow and Potential Catalysts

-Of their ~500m FUM approximately 150mil can be tracked via their public holdings. In June that 150m generated ~19.5mil in profit and should provide ~$3.5mil boost in performance fees generated. 

-I expect they will make an ASX announcement in early Aug regarding the bumper June month and performance fees.

-I expect their new Private Equity Fund (due on Aug 1 and targeting 50m FUM) will launch successfully taking total FUM to ~550m

-Annual report will confirm a huge year of 17.2mil Operating PBT (already known by the market, but the stock is underfollowed and it may catch the attention of new potential investors)

-Significant Cash on balance sheet since the previous dividend should see a decent boost in Fully Franked dividends.

-Fund inflows continue to improve – In an ASX announcement May 4th They said they were already seeing early success of a reshaped marketing and sales approach.

-Since May 4th All their funds have been doing well. The Global fund in particular which has been crushing it, is still small and has plenty of room and capacity for inflows and increased FUM. Fund Inflows can lag by a number of months as the performance results filter through to rating agencies and investors. 

-They mentioned more growth initiatives for FY22 in a previous update.

-All funds are currently making or near their highs, meaning any outperformance will go straight to the bottom line.

Relative Valuation.

IPO in May 2018 at 80c you were getting 100mil EV and 440m FUM (23% Ev to FUM) 

Currently at 75c you are getting an EV of around ~82m and ~550m FUM (15%) 
*allows for 50mil in new PE fund.

It is currently significantly cheaper than at its IPO, has a huge pipeline of positive news coming and a high probability of further immediate performance fees.

Risks

It is an equity funds management business, so it is a leveraged play on the market. The biggest risk to the SP is a significant bear market. I am not in the business of pretending I can predict when that will happen, so I just focus on buying them when they look very great value. Which I believe is right now. 

Liquidity is tricky if you want to sit on the bid, but is there if you pay up. I built my position at an av price of ~0.77