ABC arbitrage (ABCA): Initiation – A specialist arbitrage trader and asset manager
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Edison Investment Research Limited
London, UK, 01 August 2023
ABC arbitrage (ABCA): Initiation – A specialist arbitrage trader and asset manager ABC arbitrage group has been successfully developing and executing non-directional trading strategies since 1995, which has allowed the group to deliver a strong ROE of 22% over the last 15 years (with an ROE above 10% in each of these years). Historically, ABCA has paid almost all its profits as dividends. As the group has opened some of its strategies to external investors, it also offers the prospects of growing fee income from third-party capital (6.5% of total revenue in 2022).
In our base scenario, assuming growth in third-party AUM to c €434m and €617m by FY25e and FY27e, respectively, and ABCA’s long-term return on equity of c 16% pa, we arrive at a fair value per ABCA share of €6.84 (c 15% above the current share price). Our bear case scenario assumes no additional inflow of third-party capital and suggests a fair value per share of €5.76 (3% downside), whereas in our bull case scenario we assume ABCA reaches its target third-party AUM of €800m by 2025, which renders a fair value of €8.32 per share (40% upside).
All reports published by Edison are available to download free of charge from its website About Edison: Edison is a leading research and investor relations consultancy, connecting listed companies to the widest pool of global investors. By focusing on the volume and quality of investors reached – across institutions, family offices, wealth managers and retail investors – Edison can create and gauge intent to purchase, even in the darkest pools of capital, and then make introductions via non-deal roadshows, events or virtual meetings. Having been the first company in-market 17 years ago, Edison has more than 100 employees and covers every economic sector. Headquartered in London, Edison also has offices in New York, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison is not an adviser or broker-dealer and does not provide investment advice. Edison’s reports are not solicitations to buy or sell any securities. For more information, please contact Edison: Milosz Papst +44 (0)20 3077 5700 [email protected]
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1691973 01-Aug-2023
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