Impax Environmental Markets

Last updated 26 March 2019
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With global populations rising, IEM invests in companies that help humanity achieve more with less...

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Impax Environmental Markets. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Impax Environmental Markets

Impax Environmental Markets (IEM) seeks to invest in companies which will benefit from the ever- increasing need for resource efficiency, focusing on companies which operate in the water, energy, waste management and food / agriculture sectors.

IEM’s manager, Impax Asset Management celebrated its 20-year anniversary in 2018, and IEM was launched fairly early on in the company’s history. With global populations rising, Impax was founded on the thesis that companies which help humanity achieve more with less will benefit from a long-term secular tailwind. Impax aims to “anticipate the second bounce of the ball”, and enable clients to benefit from superior earnings growth, but also a re-rating from being early into specialist small and mid-cap companies located all around the world.

IEM’s portfolio companies must have at least 50% of their revenues exposed to what the Impax team view as “environmental markets”. Current themes in the portfolio include connectivity within manufacturing processes (aka Internet of Things) and Biochemicals. Another emerging trend that is rapidly becoming mainstream is that of electric vehicles (EV). Many generalist investors aim to play this theme, but in many cases use rather “blunt” instruments – such as Tesla shares – which the Impax team view as too expensive for their valuation driven investment methodology. For Impax, this is part of a much larger electronics theme which they have been investing in for three years through electronic controls, and energy efficiency.

Impax Asset Management’s thesis is reflected in the numbers. According to Impax their “Environmental Stocks” universe have grown earnings over the past five years by 7.9% pa, compared to average earnings growth for the MSCI ACWI of 3.3% pa. Moreover, forecast 12-month earnings growth for the IEM portfolio is 11.3%, against MSCI ACWI growth of 5% (Source: IEM Factset 31st Dec 2018).

Underpinned by strong fundamentals, NAV total return performance over the last 15 years has been very strong. Within this, there have been several distinct periods of outperformance. Assuming the manager’s strong run continues further into 2019, the five-year numbers will start to look very strong once again, given the trust outperformed in 2015, 2016 and 2017. One explanation for this strong run could be, finally, a broader appreciation amongst mainstream investors of the themes that Impax has been highlighting (and investing along) for so many years.

The trust currently trades on a premium of 1.2% (21st March 2019). IEM has seen a significant improvement in demand for shares, such that the board have felt able to bring in their discount target from 10% to an expectation that they will seek to maintain the share price at or close to NAV (in normal market conditions). With cash of c 2%, the current level of net gearing is 4%, according to Morningstar, reflecting the manager’s positive outlook on prospects, underpinned by their expectation of strong earnings growth from the underlying portfolio companies.

William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

Fund History

Related Research

Key facts

Investment objective

The trust aims to enable investors to benefit from the growth anticipated in resource efficiency and environmental markets, with a focus on the markets for cleaner and more efficient delivery of the basic services of energy, water and waste. 

As at:

22/03/2019

Group/Investment

Impax Environmental Markets

Ticker

IEM

Management Company

Impax Asset Management Ltd

Manager Name

Bruce Jenkyn-Jones;Jon Forster;

Association of Investment Companies (AIC) Sector

Sector Specialist: Environmental

12 Mo Yield

0.9%

Dividend Distribution Frequency

Annually


Latest Market Capitalisation

£514,861,459

Latest Net Gearing (Cum Fair)

4%

Latest Ongoing Charge Ex Perf Fee %

1.05

Turnover Ratio %

25.0

Shares Outstanding

181,289,246

(Discount)/ Premium % (Cum Fair)

1.2

Daily Closing Price

284p


Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

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