Stock Analysis & Valuation Hermes Pacific Investments plc (HPAC.L)

• Previous Close: £50.00
• Sector Valuation Confidence Level: High

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)		n/a
Graham-Dodd Method	1.34	-97
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Hermes Pacific Investments plc (HPAC.L) is a London-based private equity firm specializing in direct equity investments in both quoted and unquoted companies, partnerships, joint ventures, and projects, primarily in South East Asia. Formerly known as Indian Restaurants Group plc, the company pivoted from restaurant operations to financial investments in 2012. Operating in the asset management sector under the broader financial services industry, Hermes Pacific focuses on opportunistic investments, particularly in the financial sector, though its mandate is not strictly limited to it. With a market capitalization of approximately £11.67 million, the firm maintains a conservative balance sheet with no debt and £571,000 in cash and equivalents. Despite recent financial losses, its low beta (0.37) suggests lower volatility relative to the market, appealing to risk-averse investors seeking niche exposure to Southeast Asian ventures.

Investment Summary

Hermes Pacific Investments presents a high-risk, speculative opportunity due to its inconsistent profitability (net loss of £62,000 in FY2023) and negative operating cash flow (£108,000 outflow). However, its debt-free balance sheet and cash reserves provide a cushion for future investments. The firm’s focus on South East Asia offers growth potential tied to emerging markets, but its small scale and lack of dividends limit broad investor appeal. The low beta indicates reduced market correlation, potentially hedging broader portfolio volatility. Investors should weigh its niche strategy against operational execution risks and regional economic uncertainties.

Competitive Analysis

Hermes Pacific’s competitive positioning is constrained by its small size and limited track record in asset management compared to established peers. Its differentiation lies in targeting undervalued or overlooked opportunities in South East Asia, a region with growth potential but higher geopolitical and currency risks. The firm’s agility as a small-cap player allows for concentrated bets, but it lacks the resources, brand recognition, and diversified portfolios of larger competitors. Its zero-debt stance is a strength, but negative cash flows raise sustainability concerns. The pivot from restaurants to finance a decade ago has yet to yield consistent returns, suggesting challenges in capital allocation. Competitors with deeper regional expertise or broader mandates may outperform in sourcing and scaling deals.

Major Competitors

• Apax Global Alpha Limited (APAX.L): Apax Global Alpha is a larger, more diversified private equity investor with a global focus and a stronger track record. Its scale and institutional backing give it superior deal flow and due diligence capabilities compared to Hermes Pacific. However, its broader mandate may dilute exposure to high-growth Southeast Asian opportunities that Hermes targets.
• Polar Capital Technology Trust plc (PCT.L): Polar Capital specializes in technology investments, offering sector-specific expertise that contrasts with Hermes Pacific’s generalist approach. Its tech focus attracts growth investors, but Hermes’ regional niche in Southeast Asia provides a different risk-reward profile. Polar’s larger AUM and performance history lend it credibility Hermes lacks.
• Schroder AsiaPacific Fund plc (SDP.L): Schroder AsiaPacific offers direct competition in Asian exposure but with a public equities mandate and a robust research platform. Its established brand and performance history overshadow Hermes Pacific’s private equity focus. However, Hermes’ smaller size allows for more targeted private deals unavailable to Schroder’s liquid strategy.