TEAM plc (LON:TEAM), a Jersey-based investment management firm, is making significant strides in expanding its reach and enhancing its service offerings. According to recent research by Hannam & Partners, TEAM plc is strategically positioned to deliver exceptional performance and diversification for expatriate clients in Asia, Africa, and the Middle East. As client assets increase, the company is set to benefit from high operating leverage and rising profitability.
Strategic Funding and Growth
TEAM plc has faced challenges in accessing adequate funding, particularly in a market characterised by outflows from UK equity funds. However, the first half of 2024 has seen substantial progress. The company raised £1.3 million in new equity and secured an additional £0.5 million from a convertible loan note, boosting its cash balance to £1.5 million.
Ben Williams, Director of Financials Research at Hannam & Partners, emphasises the strategic importance of these developments: “The company has now raised some £9.4 million, and we believe it has visibility to cash break-even. However, it is clear that further external funding will be required. The company is consequently in ‘advanced discussions’ with a strategic/financial investor for additional funding and deeper collaboration.”
Strong Model Portfolio Service (MPS) Performance
TEAM plc’s Model Portfolio Service (MPS) strategies have been a significant driver of growth. All three main MPS strategies – Multi Asset Growth, Multi Asset Balanced, and Multi Asset Cautious – are outperforming their benchmarks both in the short and long term. This strong performance enhances TEAM International’s value proposition to its clients.
As of H1 2024, the MPS manages £97 million, with the company guiding that an additional £100 million in the MPS would lead the investment management division to break even. This demonstrates the scalability and efficiency of TEAM’s investment management platform.
Expanding International Division
TEAM plc’s International Division, formed from the acquisitions of Globaleye and Neba in 2023, now operates under the Neba Private Clients brand. The division has grown significantly, with 42 self-employed advisers who are highly incentivised. The division’s leadership has streamlined operations, reducing office costs by 50%, and is expected to reach breakeven by H2 2024.
The acquisition strategy has bolstered TEAM’s assets under advice and management (AuA/M), which saw an 87% year-on-year increase to £916 million. This includes a notable 31% growth in assets under management (AuM) to £321 million and a 142% rise in AuA to £595 million.
Financial Performance and Future Outlook
TEAM plc reported revenues of £4.1 million for H1 2024, a 116% increase compared to the previous year. Despite indirect costs being down by 2% (excluding growth in the International Division), the company still posted a pre-tax loss of £1.0 million. However, with continued cost control measures and strategic investments, the company is on a path to improved profitability.
The company’s guidance indicates a positive outlook, with expectations of a 47% compound annual growth rate (CAGR) in assets managed by the investment management division over the next four years, leading to a 26% revenue CAGR. The breakeven point is anticipated to be 9-12 months away, with forecasted earnings per share of 2.9p in FY 2026 and 5.5p in FY 2027.
Valuation and Market Potential
Based on a discounted cash flow (DCF) analysis, Hannam & Partners assigns a fair value of 70p per share to TEAM plc, which represents almost a 5x increase from the current share price. This valuation reflects the company’s potential to attract more assets, achieve profitability, and avoid significant dilution along the way. With a 10% weighted average cost of capital (WACC) and a conservative 16% medium-term growth rate, the company is well-positioned for substantial growth.
Final Thoughts
TEAM plc’s strategic initiatives and strong performance indicators highlight its potential to become a major player in the investment management sector, particularly for expatriate clients in high-growth regions. With ongoing funding discussions, a robust MPS platform, and a rapidly expanding international division, TEAM plc is set to achieve its ambitious growth targets and deliver significant value to its shareholders. As Ben Williams aptly summarises, “The core business is stable and growing, supported by rising markets and strong net inflows. We remain confident in TEAM plc’s ability to reach profitability and drive long-term growth.”
