Stock In Focus: Premier Miton - Buying Opportunity Ahead Of Results?

18th Feb '20 by Roland Head

9 comments 3483 reads

Thank you for the terrific response to my article last week, which took a fresh look at my SIF strategy and discussed possible areas of change.

One subscriber comment highlighted the sad state of my screen results at the moment. It’s true! At the time of writing, my Stock in Focus screen is currently only returning six stocks. Five out of these six stocks are already in the SIF portfolio (this link will only work on the old Stocko website). The remaining stock is a Russian fertiliser firm that’s outside my scope for this fund.

The SIF screen is not generating any new buys at the moment -- all of these shares are already in the portfolio:

All of which means that once more I am unable to add a new stock to the portfolio this week. However, following on from my recent coverage of the Redde-Northgate merger, I’ve found another recently-merged firm that almost satisfies my screening criteria.

A super stock in the making?

Premier Miton Group (LON: PMI) was formed in November 2019 from the merger of former small cap specialist Miton Group (MGR) and Premier Asset Management (PAM). The company has not yet published a combined set of accounts and share price performance since the merger has been lacklustre.

There’s not much enthusiasm for fund managers at the moment. In addition to this sector headwind, I suspect that some potential investors have held back from investing until a full set of figures are available.

Situations like this sometimes provide buying opportunities. The shares look quite modestly valued to me and offer a tempting 6.5% dividend yield. To find out more, I’m going to take a closer look at this newly-formed business.

Medica Group - a potential compounder?

Before I get started, I’d like to point you towards Jack Brumby’s recent piece on Medica Group (LON: MGP) - Medica - A high quality healthcare compounder?

This small cap healthcare stock joined the SIF portfolio in July last year and has performed well so far. However, it’s always useful to get a fresh perspective on a stock you own. Jack’s in-depth piece gives a great overview of this promising business.

Premier Miton Group - what’s the point?

Miton Group was a stock I owned…

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Mike Jones

18th Feb '20

Hi Roland. As a former #MGR shareholder I now own Premier Miton (LON:PMI), so I appreciate your detailed analysis and comments above. Prior to the merger I was unfamiliar with #PAM, but when I looked at the metrics it seemed a good fit and with potential upside to its valuation. I also thought the merger terms were fair and so I was happy to hold. I like the potential returns, cash generation and yield of the combined group and the way the key-person issue has been resolved. I still think it is undervalued and its performance has certainly lagged a number of my other holdings, but I am optimistic that the combined numbers in a decent market will vindicate my confidence in the company. The first set of numbers will be an important indicator. We shall see!

I meant to add... that my screens are also showing very few stocks, which leads me to believe that many are fairly priced at the moment. I think I may be sitting on cash for a while before buying opportunities present themselves in any quantity. Good luck with you SIF.

InvestorJohn

Hi Roland - Very well spotted I had lost track of Miton at the point of the merger and forgot about it - meets most of my criteria now!

coniston

As you've alluded to Roland Aum is a key indicator I look for ,a rule of thumb to me is 3% of Aum is what I would consider fair value , however Aum need to be increasing to bring down fees, which imo is why LIO is highly valued.

stevenhume

Wife of the CEO bought 50k plus worth of shares on 14/2/2020, at 1.65.

iwright7

Do we know when Premier Miton (LON:PMI) is due to report?

William K

19th Feb '20

Premier Miton (LON:PMI) is currently trading at 10% below its 200 MA. I'd like to see it climb above 183 before making an investment decision.

Martin Verlaine

I agree the generally accepted metric is AUM. I note there has been a drastic fall in the Miton Smaller Companies Fund run by Gervis Williams and some criticism on the inevitable liquidity issues which have arisen due to needing to fund redemptions of some scale. This does not bode well for the next report if carried over to other funds. Merging people’s businesses is fraught with the potential for defections and cost saving from merging funds is obviously something that will be on the agenda. I suggest the recent underperformance and hence yield reflects that the jury is out on the merger. As we can see from Jupiter Merian some of the earlier mergers and acquisitions in this area may be seen as ‘ expensive’ given the active v passive debate is going to run and run.

Caulkhead

20th Feb '20

I had a quick look at the Stockreports of the top 10 holdings in the small cap fund a few months ago. They were pretty disastrous on the whole - hence the outflows.

Stock in Focus: Premier Miton - buying opportunity ahead of results?

A super stock in the making?

Medica Group - a potential compounder?

Premier Miton Group - what’s the point?

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Roland Head

9 comments

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