Claranova — Organic growth across the board

Claranova (PAR: CLA)

Last close As at 27/03/2024

EUR2.60

0.07 (2.77%)

Market capitalisation

EUR145m

More on this equity

Research: TMT

Claranova — Organic growth across the board

Claranova reported 53% year-on-year revenue growth for Q219, with organic growth of 36%. All divisions contributed to organic growth, and the Canadian businesses acquired by Avanquest also performed well. While H119 revenue growth rates are ahead of our FY19 growth forecasts, we are maintaining estimates until further detail on profitability is disclosed on 27 March. We believe that the risk to earnings is on the upside.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Claranova

Organic growth across the board

Q2 revenue update

Software & comp services

8 February 2019

Price

€0.76

Market cap

€297m

$1.13:€1

Net cash (€m) at end FY18

37.5

Shares in issue

391.2m

Free float

91%

Code

CLA

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

10.0

(18.0)

(30.4)

Rel (local)

4.2

(14.8)

(26.0)

52-week high/low

€1.1

€0.5

Business description

Claranova consists of three businesses focused on mobile and internet technologies: PlanetArt (digital photo printing), Avanquest (consumer software) and myDevices (Internet of Things). It is headquartered in Paris with operations in Europe, the US and Canada.

Next events

H119 results

27 March 2019

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Dan Ridsdale

+44 (0)20 3077 5729

Claranova is a research client of Edison Investment Research Limited

Claranova reported 53% year-on-year revenue growth for Q219, with organic growth of 36%. All divisions contributed to organic growth, and the Canadian businesses acquired by Avanquest also performed well. While H119 revenue growth rates are ahead of our FY19 growth forecasts, we are maintaining estimates until further detail on profitability is disclosed on 27 March. We believe that the risk to earnings is on the upside.

Year end

Revenue (€m)

EBITDA
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

06/17

130.2

(5.0)

(6.6)

(0.02)

0.0

N/A

06/18

161.5

3.9

3.1

0.01

0.0

120.5

06/19e

234.6

16.9

13.6

0.02

0.0

39.0

06/20e

274.8

28.5

25.3

0.04

0.0

20.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Strong Q2 across all businesses

Reported revenue growth for Q219 was strong across the board: PlanetArt +40% year-on-year, Avanquest +106% and myDevices +81%. Stripping out acquisitions, Avanquest saw 16% organic growth, significantly better than the 3% last quarter and declines in FY18. The acquired businesses saw 23% underlying growth for H119, with Adaware showing particular strength (+42% y-o-y).

PlanetArt developments support future growth

In January, the company announced that it had launched FreePrints in the Netherlands, expanding its reach in Europe. Since FreePrints was launched in India in September last year, the app has been downloaded more than 0.5m times despite limited marketing expenditure. While initial basket sizes are likely to be small (as only photo prints are available, customers are new to the service, and disposable income is lower than in Europe/North America), the level of demand bodes well for future revenue contributions.

Valuation: Positive growth outlook supports upside

Reflecting the different business models and minority interests for each division, we use a sum-of-the-parts approach to valuation. Based purely on peer group averages per division, we calculate a fair value of €0.86 per share. However, once multiples are adjusted to reflect our views on the growth and profitability of each division, this increases to €1.11 per share. Milestones that could provide upside to our forecasts include: successful adoption of FreePrints in India; growth of the acquired Adaware business; and distributors reselling the myDevices platform in the US and China.

Q2 revenue update

Exhibit 1: Quarterly and half-yearly revenues

Revenues (€m)

Q219

Q218

y-o-y

y-o-y

y-o-y

Reported

Constant currency

Organic

PlanetArt

67.4

48.2

40%

37%

40%

Avanquest

23.2

11.3

106%

107%

16%

myDevices

0.9

0.5

81%

76%

81%

Total

91.5

59.9

53%

51%

36%

y-o-y

y-o-y

y-o-y

H119

H118

Reported

Constant currency

Organic

PlanetArt

97.8

69.2

41%

39%

41%

Avanquest

40.1

19.7

103%

103%

11%

myDevices

1.7

1.0

77%

73%

77%

Total

139.6

89.9

55%

54%

35%

Source: Claranova

Claranova has reported strong Q2 revenue growth, with reported growth of 53% y-o-y and 36% growth on an organic basis. On a half-year basis, it reported growth of 55% and organic growth of 35%.

PlanetArt: constant currency growth of 37% in Q2 was slightly down from the 44% achieved in Q1, resulting in H1 constant currency growth of 39% y-o-y. The company highlighted strength in Europe as well as good demand for FreePrints Photo Tiles, which were not available a year ago. In January, the company launched FreePrints in the Netherlands, expanding PlanetArt’s presence in Europe and providing an additional driver of growth for the business. The company noted that it has seen a strong level of downloads of its app in India, although as we have previously written, we not expect this to materially affect revenues in the current year.

Avanquest: strong constant currency growth of 107% in Q2 increased from the 99% achieved in Q1. Encouragingly, the original Avanquest business saw 16% organic growth in the quarter, up from 3% in Q1. The acquired Canadian businesses generated organic growth of 23% in H119, with Adaware generating organic growth of 42%.

myDevices: the business saw strong revenue growth, albeit off of a low level last year. Sprint contributed revenues of c $1m/€0.9m in H119.

While the revenue update confirms that reported revenue growth for H119 is running ahead of our growth forecasts for PlanetArt and Avanquest for FY19 (we estimate 32.5% and 91.7% respectively), we maintain our forecasts pending further detail on costs and profitability when H119 results are reported on 27 March.


Exhibit 2: Financial summary

€m

2015

2016

2017

2018

2019e

2020e

30-June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

93.1

117.4

130.2

161.5

234.6

274.8

EBITDA

 

 

(6.8)

(9.2)

(5.0)

3.9

16.9

28.5

Normalised operating profit

 

 

(11.4)

(16.0)

(5.8)

3.4

16.4

28.1

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

15.6

(10.0)

0.4

(2.4)

0.0

0.0

Share-based payments

(0.0)

(0.1)

(4.8)

(7.1)

(5.4)

(2.0)

Reported operating profit

4.2

(26.1)

(10.1)

(6.1)

11.0

26.1

Net Interest

1.1

(1.7)

(0.9)

(0.3)

(2.8)

(2.8)

Joint ventures & associates (post tax)

0.0

(0.0)

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(10.3)

(17.7)

(6.6)

3.1

13.6

25.3

Profit Before Tax (reported)

 

 

5.3

(27.8)

(11.0)

(6.4)

8.2

23.3

Reported tax

(0.6)

(0.8)

(0.4)

(1.8)

(1.9)

(5.4)

Profit After Tax (norm)

(10.9)

(18.5)

(7.0)

2.4

10.5

19.5

Profit After Tax (reported)

4.7

(28.6)

(11.4)

(8.2)

6.3

17.9

Minority interests

(8.1)

0.0

0.3

0.2

(2.4)

(4.1)

Discontinued operations

(3.2)

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(18.9)

(18.5)

(6.7)

2.6

8.1

15.4

Net income (reported)

(6.5)

(28.6)

(11.0)

(7.9)

3.9

13.8

Basic average number of shares outstanding (m)

58

375

375

394

391

391

EPS - basic normalised (€)

 

 

(0.33)

(0.05)

(0.02)

0.01

0.02

0.04

EPS - diluted normalised (€)

 

 

(0.33)

(0.05)

(0.02)

0.01

0.02

0.04

EPS - basic reported (€)

 

 

(0.11)

(0.08)

(0.03)

(0.02)

0.01

0.04

Dividend (€)

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

N/A

26.1

10.9

24.0

45.3

17.1

EBITDA Margin (%)

-7.3

-7.9

-3.8

2.4

7.2

10.4

Normalised Operating Margin

-12.3

-13.7

-4.4

2.1

7.0

10.2

BALANCE SHEET

Fixed Assets

 

 

15.7

3.0

2.0

1.3

27.8

27.6

Intangible Assets

12.0

1.5

0.9

0.5

27.1

26.9

Tangible Assets

0.6

0.5

0.3

0.2

0.1

0.1

Investments & other

3.1

1.1

0.7

0.6

0.6

0.6

Current Assets

 

 

48.0

25.5

28.1

79.1

85.8

111.5

Stocks

5.9

5.0

3.7

3.7

6.4

7.5

Debtors

4.8

4.7

4.3

4.9

7.7

9.0

Cash & cash equivalents

30.5

11.1

17.1

65.7

66.9

90.1

Other

6.9

4.7

2.9

4.8

4.8

4.8

Current Liabilities

 

 

(32.0)

(25.3)

(28.1)

(37.2)

(43.6)

(49.0)

Creditors

(26.9)

(24.5)

(26.6)

(35.4)

(41.8)

(47.2)

Tax and social security

(0.3)

(0.0)

(0.3)

(1.7)

(1.7)

(1.7)

Short term borrowings

(4.8)

(0.7)

(1.1)

(0.1)

(0.1)

(0.1)

Other

0.0

0.0

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(2.4)

(1.1)

(0.7)

(29.0)

(46.0)

(46.0)

Long term borrowings

(1.8)

(0.6)

0.0

(28.1)

(45.1)

(45.1)

Other long term liabilities

(0.7)

(0.5)

(0.7)

(0.9)

(0.9)

(0.9)

Net Assets

 

 

29.3

2.1

1.3

14.2

24.1

44.0

Minority interests

0.0

0.0

(0.1)

(1.8)

(4.2)

(8.2)

Shareholders' equity

 

 

29.3

2.1

1.2

12.5

19.9

35.8

CASH FLOW

Op Cash Flow before WC and tax

(6.8)

(9.2)

(5.0)

3.9

16.9

28.5

Working capital

0.4

2.5

6.8

7.9

0.8

3.1

Exceptional & other

(3.8)

(4.3)

(2.2)

(5.2)

0.0

0.0

Tax

0.3

(0.3)

(0.0)

(1.2)

(1.9)

(5.4)

Net operating cash flow

 

 

(9.8)

(11.3)

(0.4)

5.5

15.8

26.2

Capex

(4.4)

(0.9)

(0.2)

(0.1)

(0.2)

(0.2)

Acquisitions/disposals

10.8

(0.4)

3.6

14.2

(9.9)

0.0

Net interest

(0.9)

(0.1)

(0.0)

(0.3)

(2.8)

(2.8)

Equity financing

33.2

(5.1)

1.9

2.0

(1.8)

0.0

Dividends

0.0

2.0

0.0

0.0

0.0

0.0

Other

0.1

0.1

0.1

(1.1)

0.0

0.0

Net Cash Flow

29.0

(15.7)

5.0

20.1

1.153

23.3

Opening net debt/(cash)

 

 

18.0

(23.9)

(9.8)

(16.0)

(37.5)

(21.7)

FX

0.1

(0.1)

(0.6)

0.4

0.0

0.0

Other non-cash movements

12.6

1.7

1.8

1.1

(17.0)

0.0

Closing net debt/(cash)

 

 

(23.9)

(9.8)

(16.0)

(37.5)

(21.7)

(44.9)

Source: Claranova, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Claranova and prepared and issued by Edison, in consideration of a fee payable by Claranova. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Frankfurt +49 (0)69 78 8076 960

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United States of America

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Claranova and prepared and issued by Edison, in consideration of a fee payable by Claranova. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Research: Investment Companies

Aberdeen Standard Equity Income Trust — Optimism based on attractive valuations

Aberdeen Standard Equity Income Trust (ASEI, formerly Standard Life Equity Income Trust [SLET]) has been managed by Thomas Moore since November 2011. He is bullish on the long-term outlook for the trust as the yield on the portfolio is the highest since the end of the global financial crisis in 2009, suggesting UK share prices are discounting a recession or another global crisis. The manager says that ASEI’s holdings – chosen from across the market cap spectrum – can be classified in one of three ‘buckets’: global yield (c 40% of the portfolio), domestic opportunities (c 30%) and uncorrelated value (c 30%), and he is finding good opportunities in all three. The trust’s revenue was higher than projected in FY18, leading to an annual dividend increase of 12.3%, which was much higher than the 7.5% compound annual growth rate over the last five years.

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