Antiques: An artist who punched above his weight

Q:  I’m intrigued by this fanciful watercolour I inherited that looks like gnomes riding a horse. I don’t know if it has any value but I’m wondering if it might have some history to it, as it doesn’t seem like an amateur work. It measures 11 x 23.5 cm (4.25 x 9.25 inches) but with no signature – just initials at the bottom right corner. The second initial looks like a D. I know this is probably a long-shot but I’m hoping you might be able to help.
Arthur,