Hits: 12

15 July 2020

City of London Inv. Group – Pre-close Update

Share Price 395p

Mkt Cap £105m

Conflict Disclosure: No Holding 

  • Update AUM has increased 2% over the year, which represents a 25% increase over the final quarter to June. Emerging markets and frontier have been hardest hit. Developed Markets and Opportunistic value have fared better.  Merger with Karpus Management expected to complete 1 October.
  • Estimates Flat revenues are currently forecast over the next 18 months
  • Valuation PE 12.2, Yield 7%
  • Conclusion The near doubling of the market cap on the merger in October has the potential to re rate this niche fund manager. With a resilient track record investors shouldn’t be put off by the recent share price strength. Plenty to go for.

14 January 2020

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City of London Investment Group – Trading Update

Share Price 442p

Mkt Cap £117m

Conflict Disclosure: No Holding

  • Update AUM up 4.6% in sterling over the 6 months to December. Net inflows were $182m (3.3%) and encouragingly the company has visibility on a further $200m of inflows to fund in the next quarter. Fees averaged 75 bps. PBT is estimated to be £6.3m in H1, 21% up on the prior year. 10% increase in the interim dividend
  • Estimates PBT of £11.7m is anticipated for the full year. Having delivered 54% of this in H1 and with visibility on H2 inflows this could be perhaps a 10% upgrade for FY.  
  • Culture With Barry Oliff having now retired it will be interesting to see if the culture evolves from what has traditionally been run tightly in the manner of an owner managed business.  
  • Valuation PER 12.2X, Yield 6.1%.
  • Conclusion With upgrades and management change the company could be in danger of becoming a growth stock. I also quite fancy emerging markets could have a good year this year. With a 6% yield this is one to own.

16 September 2019

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City Of London Inv. Group- FY Results 

Share Price 420p

Mkt Cap £111m

Conflict Disclosure: No Holding

  • Results –  FUN $5.4bn at 30 June is up 6% over the year while management fee revenues were down6% to £31.9m and PBT down 11% to £11.4m. EPS down 12% to 34.9p and the full year dividend payment amounts to 40.5p of which 13.5p was a special dividend. The average AUM was down 3% over the year while the fee margin declined 5% to 76 bps while costs increased in part due to the new REIT team joining. The outlook is “optimistic” and hopes for a return to profit growth in the current year. It also encourages all shareholders to both “attend the AGM” and “read the rest of this report”.
  • Estimates Results are in line with estimates and for the current year a 3% improvement in pre tax profit is anticipated to £11.7m. 
  • Valuation EV/AUM is 2.1%. PER 11.5X, Yield 6.4%.  The only share cheaper fund manager on an EV/AUM basis is Premier/Miton at c 2%, while Jupiter trades at 3.3%.
  • Conclusion With Barry Olliff leaving at the end of December combined with a volatile share the shares are cheap.  The company has invested in staff and new teams and I suspect the risks of management change may well turn out to be benefits. The shares could do well, or corporate activity may benefit shareholders

16 July 2019

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City of London Investment Group – Pre Close Update 

Share price 430p

Mkt Cap £114m

Conflict Disclosure: No Holding

  • Statement AUM is up 5.5% over 12 months which is up 1.5% over the final 3 months of the year to $5.389m. PBT expected to be £11.4m (20187 £12.8m) PAT expected to be £9m (2018 £10.1m) EPS expected to be 34.1p (2018 39.3p). Detailed assumptions for analysts models are set out in a table that usually takes 45 minutes of an analyst meeting to convey.
  • Estimates The £11.4m PBT is ahead of the consensus expectation of £10.9m. EPS is also ahead of the 33.5p expectation. Forecasts are for 6% PBT growth which looks in line with the guidance of 4.6% AUM growth and no increase in overheads.
  • Valuation PER 12X Yield 6.3% EV/AUM 2.3%
  • Conclusion With the founder retiring there is a chance this company could be acquired which should underpin the valuation. The shares are up 9% over the last 12 months and look set continue as a useful dividend compounder.

16 April 2019

City of London Investment Group – Trading Update  

Share Price 399p

Mkt Cap £107m

Disclosure No holding

  • Update Net inflows were 3.1% over the period but AUM overall were up 14% in three months to $5.3bn. Run rate revenue yield is 76bps and so the run rate profit is currently £1.5m per month
  • Estimates Forecasts are for £31m revenue, a decline of 5.5% over the year to June 19.  Current revenue run rate is c $40m from $5.3bn AUM in line with forecasts though profitability looks a little ahead of forecasts in terms of the £18m run rate.
  • Valuation PER 11.5X, Yield 7.2%
  • Conclusion Reassuring update.  Very cheap. Too cheap but I do worry about the management change. Perhaps this business will succumb to a bid this time with many of the fund managers having excess cash at this point in the cycle.

18 February 2019

City of London Investment Group – H1 Results 

Share Price 383p

Mkt Cap £102m

  • Results Revenue fell 9% year on year to £14.5m and PBT declined 21% to £5.1m as costs were maintained flat in the face of market declines. EPS was 16.3p (2017 A 20.2p).  The interim dividend has been maintained at 9p and a special dividend of 13.5p is to be declared. The outlook statement says their process will continue to serve them well even in difficult markets.  The AUM have increased from the previously declared $4.63bn at December to $5.1bn at end January. A new KPI has been unveiled including a 12.5% compound freturn over a 5 year rolling period on the shares up from the previous 7% and a new REIT team has been recruited which is highly scalable.
  • Estimates Forecasts are based on £30.6m for the full year to June and they have delivered 47% in H1. Given the AUM started the year at $5.1bn and are now back at $5.1bn after falling to $4.6bn in December this looks achievable.
  • Valuation PER 11.5X and yield 7.1%. The shares were 450p back in March.
  • Conclusion The striking thing in these results is the more ambitious KPI’s being announced together with the new REIT team expanding the potential for the company. Underpinned by a 7.1% yield and a strong balance sheet these shares could go up. Something that hasn’t happened for a while.

16 January 2019

City Of London Investment Group – Trading Update 

Share Price 375p

Mkt Cap £100m

  • Update AUM of $4.6bn is down from $5.1bn at June 18 and $5bn at September 18. Net outflows were modest at £42m over the 6 month period. PBT for the 6 months to December is expected to be £5.2m down from £6.6m the prior year.
  • Estimates Consensus looks to be around £12m PBT for the year to June 19 which may look a little aggressive given the 10% decline in AUM. Expecting downgrades.
  • Valuation PER is 9.6 X before downgrades but the yield is 7.9%
  • Conclusion Shares are down by only 13% from their highs and given the declines in AUM and management changes the shares are supported by the dividend but it is difficult to make a strong case for these at the moment.

18 October 2018

City Of London Investment Group – Q1 update 

Share Price 396p

Mkt Cap £106m

·         Update AUM declined by £0.1m over the 3 months to September consisting of a modest net inflow and market decline. Emerging market and frontier market performance was weak. Q1 PBT was £2.2m against £2.5m last year

·         Estimates PBT for the year to June 2019 is forecast to increase 6% to £13.7m. Q1 last year accounted for 20% of the full year profit.  The lacklustre Q1 means its done 16% of the full year in Q1.

·         Valuation PER 10X, yield 7.2% on existing forecxasts which look aggressive. EV/AUM 2.2%

·         Conclusion  Lacklustre performance is perhaps unsurprising given the sector the company inhabits. With the founder CEO standing down next year this increasingly looks like a take out candidate where 2.2% of AUM for funds yielding 77bps is good value. In the meantime the shares will be supported by the dividend yield