Professional investors anticipating reduced reporting coverage on micro-cap stocks
A new survey of professional investors in the UK, US and Germany, reveals that 40 per cent expect the cost of obtaining information and monitoring small and microcaps will increase over the next three years, as they receive less attention from brokers and analysts.
This compares to just 22 per cent of investors who believe the cost will fall and data will become easier to source.
The findings are from MBH Corporation, a diversified investment holding company listed on the Frankfurt and Dusseldorf Stock Exchanges that acquires successful, well established small to medium sized enterprises across multiple geographies and sectors.
Five in six professional investors (83 per cent) see small and microcap stocks as a more transparent alternative to private equity investments, due to their real-time pricing, greater liquidity and lower fees. Despite this, 42 per cent of the 117 professional investors surveyed predict the level of coverage for the micro-cap market by brokers and research houses to decline over the next 12 months - 5 per cent anticipate a dramatic fall. Just 15 per cent expect the level of coverage to increase.
Callum Laing, CEO of MBH Corporation, says: “In recent months, coverage of the microcap market by brokers and research houses has fallen, partly due to MiFID II. Our research shows that many professional investors expect this trend to increase, which will make it even harder for them to spot potential small market investment gems.”
MBH Corporation recently published its half year results for 2020, which revealed revenue growth of 31 per cent to GBP27.4 million (H1 2019: GBP21.0 million) and a stable net profit of GBP0.7 million. Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 13 per cent to GBP1.5 million (H1 2019: GBP1.3 million).
MBH currently has 21 very successful and profitable small businesses in its portfolio and, as part of a continued growth drive, is looking to acquire more companies of a similar nature.
MBH targets well-established companies that are predominantly debt free, delivering around GBP0.5 million-GBP10 million EBITDA and are generally still run by their founders.
By leveraging its unique Agglomeration strategy, MBH can create substantial shareholder value through the consistent and accretive acquisition of excellent companies. With Agglomeration, profitable companies convert their private shares into public shares or bonds in MBH Corporation in a perpetual earn-in model. Company owners are then incentivised to accelerate their growth trajectory using the resources of the plc including expertise, skill transfer of best in class practices, cross-selling to other group companies and where appropriate, zero cost funding for new growth projects.
Each group company retains its autonomy and follows appropriate corporate and financial governance. Business owners are also incentivised financially to enhance shareholder value through a share bonus scheme aligning their interests with public shareholders.