Duke Capital: Unlocking growth with strategic equity raise

Hardman & Co
[shareaholic app="share_buttons" id_name="post_below_content"]

In our April 2024 initiation, we highlighted that Duke Capital plc (LON:DUKE), by optimising the best of equity and debt, aimed to achieve equity-type returns with debt levels of risk. We highlighted four pillars of returns, namely: i) term credit; ii) participating preference shares, which support the company’s high, covered and growing dividend yield (2025E 10.0%, 2026E 10.7%, 2027E 11.4%); iii) early exit fees; and iv) equity stakes. Here, we update investors on how management will take the gorup to the next level, noting i) a £20.2m+ equity issue to fund short-term growth, and ii) the progress made towards a third-party capital model, negating the need for further raises.

  • Equity raise: Instead of the £40m raise we had been forecasting in FY’26, Duke Capital seeks to raise £20.2m+ now, and indicates greater confidence that further issues will not be necessary. The risk of dilution is thus lower than it was before this announcement. The current raise is to fund expected client buy-and-build deals.
  • Third-party capital model: Using third-party capital potentially brings revenue, gearing, risk, liquidity, capital and income benefits. The constraint, to date, has been that DUKE’s innovative product was little known. As a track record has been built, confidence has grown, and DUKE has made significant progress.
  • Valuation: The FY’25E dividend yield is 10.0%. On the assumptions outlined in the initiation report, our valuation approaches indicate GGM 44.2p, discounted cashflow 72.3p, and dividend discount 43.1p, with an average of 53.2p against the current share price of 28.1p.
  • Risks: Counterparty risk is core to any finance provider. Currently, there is adverse sentiment to most speciality finance businesses. We see a short-term dependence on key staff. Many investors are unfamiliar with the product, there are few comparators, and the underlying assets are likely to be illiquid.
  • Investment summary: By having a unique proposition, which adds value to clients, and with high barriers to entry, Duke Capital is able to generate strong returns and thus pay a high, consistent dividend. The way the product is structured provides multiple levers for both income and capital growth, as well as limiting the downside risk. DUKE has invested in new staff in FY’24 to optimise the opportunity while showing good discipline in the pacing of new investments.
Share on:
Find more news, interviews, share price & company profile here for:

Unlocking UK SMEs with smarter finance

UK SMEs are ready to grow, but outdated lending systems hold them back. A smarter, data‑driven ecosystem, supported by fintech, flexible credit, and policy reform, can unlock untapped potential and reshape investor opportunity.

Duke Capital strengthening its income foundation

Duke Capital is shifting focus from event-driven gains to reliable, recurring revenue, backed by disciplined follow-on deals and resilient cash cover.

Duke Capital reports £25.8m recurring revenue

Duke Capital Limited has reported solid results for the year ended 31 March 2025, with recurring cash revenue up 6% to £25.8 million and the dividend held at 2.80 pence per share.

How hybrid capital is powering a new era for SME lending

UK SME lending is on the rise, with banks reporting a 30% increase. Discover how Duke Capital is innovating hybrid financing to support sustainable growth.

Duke Capital declares Q1 interim dividend of 0.70p per share

Duke Capital Limited (LON:DUKE) announces a 0.70 pence interim dividend for Q1, with key dates for investors on ex-dividend and payment.

Intrigue emerges as SME sector reshapes expectations

Amid economic uncertainty, smaller businesses are demonstrating unexpected resilience and growth. Discover how mid-sized firms are evolving and attracting investment.

Search

Search