Managers and Other Animals -We have a note out today
offering some perspective in a world where most broker research is short
term. We compare the quoted fund managers to where they were in 2010 and
find that some have got not very far while others have travelled a long
way. We then look at flows and introduce a 1 year trailing weighted
performance measure to see where they go next. Please email if any
one wants 12 months of notes for £1k +VAT.
Group – whose profits are lower than they were 10 years ago
– confirms another restructuring yesterday moving the holding company to
Jersey and renaming it “New Man Group”. Sounds a bit like a high
street retailer to me.
conducted a survey of 275 financial advisers and found 77% believed the
UK would move to a subscription fee model instead of an asset based
charge. Interactive Investor are the only platform in the UK to adopt
this model and Charles Schwab in the US have recently moved from an asset
based charge to a subscription model.
this model becomes the norm for financial advice I find myself wondering
when it may arrive in the fund management space too. It would decimate
the super profits of some fund managers who run large global funds while
potentially lowering the barriers to entry for small funds. Which
would move the landscape in favour of niche products away from large cap
product. Just like with research I find myself thinking
Plc– Trading Update
Net inflows (described as NCCF) were 0.5% bringing total AUM with market
tailwinds to £114.9bn up 5.1%. Wealth and Advice experienced 0.7%
net inflows while the platforms experienced net outflows of £1.5bn (2.2%)
and the life book experienced outflows of £0.8bn (6%). A £0.2bn portfolio
loss is expected to impact Q2.
Anticipate 12% EPS growth this year
Per 14X Yield 3.5%. But this should really be a SOTP valuation. Advice and
Wealth made £102m PBT last year which may be worth £1bn. And apportion 75%
of the profits in the platform business putting them on a PER of 16 and
the balance of 25% from the life book on a PER of 5 we get c. £2.5bn
The shares look quite pricey for a business with modest flows. The
acquisition of Lighthouse bring a network of self employed adviser which
will need a lot of sorting out. Struggling to see the attractions here.
PLC – Trading Update
AUM was down 0.9% with net outflows of £3.4bn over the
3 months to March up from £1.1bn the previous quarter. Client number
unchanged at 65 and fee rate unchanged.
The anticipated 3% revenue growth looks hopeful to
March 19 but the statement suggests trading is in line. 2020 estimates
assume a 10% revenue fall.
Per 12, yield 8%
This business looks like it has lost its way and is
priced accordingly. The 8% yield may have attractions but better returns
may be found elsewhere.
Congratulations to Morses Club for their recent win at
the “Complaints Handler of the Year” awards. I imagine there is less
fighting than there would be at the “Fund Manager of the Year” awards
Patrick Snowball publishes a letter to PFG shareholders
urging them to take no action
Twitter poll yesterday:
Asset Management – Trading Update
AUM is up 25% over 12 months to £6.1bn. Over 6 months from
September the AUM is up 7%. Paradigm mortgages increased its member
firms by 14% to 1393. But fee pressure in the consulting business
results in no growth there.
Zeus forecast £7.8m PBT from £17.5m revenue for the
year to March 2019. This is based on average AUM of £5.5bn which looks to
be in line with expectations while a modest reduction from £9.1m revenue
to £8.8m was expected in mortgages and consulting which looks reasonable.
Current PER 19 Yield 3.5%
The growth driver is likely to be the asset management
business which currently accounts for c. half the revenue. This
growth story is in tact. I would like to understand why the fee pressure
for the consulting business is not apparent at Simplybiz but it is for Tatton.
No catalyst to move the shares onwards today but the law of small numbers
should mean that this will produce a good return from the growth in asset
of London Investment Group – Trading 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
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.
PER 11.5X, Yield 7.2%
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.
Group – Trading Statement
6.5% net inflows combined with help from markets help AUM to rise 11.2%
over the quarter to $85.3bn.
assume a 5.5% increase in revenue over the 12 months to June 19. With AUM
now up 11.5% over the 12 months this looks light
EV/AUM 3.2%. PER 17.5X yields 4%
Expensive but it usually is. I sense the market underestimates the fee
margin contraction in this specialist asset class suggesting that perhaps
the best returns have been had from this high margin business. But
this is a positive update
unfortunate that NSF Plc, in the midst of their bid for Provident
Financial were forced to put out a statement saying they may have paid
distributions wrongly between subsidiaries where there may not have been
adequate distributable reserves. Still with Malcolm Le May, CEO of
Provident, heading up IG Group’s nomination committee where the Chairman
has resigned he is busy so perhaps it won’t be seized upon. Aided of
course by NSF releasing their announcement at 5.04pm on Friday.
Dolphin – Talks
Following the Sunday Times reports over the week end
Brewin confirms it is in exclusive discussions to acquire Investec
Wealth’s Ireland business. Rathbone is also reported to be
interested in buying the business but it appears they have been pipped by
Brewin. The price is alleged to be Euro 60m (£52m).
No AUM number is quoted. If we made the heroic
assumption that it equates to 10X EBIT given Brewin is paying cash this
could potentially be 6-7% earnings enhancing.
Current PER 15.4 Yield 5.0%. EV/AUM 1.8%
The EV/AUM for Brewin is very low as the cash has been
building up in the balance sheet. To use the cash for acquisitions would
be usefully enhancing when things are quiet. The sector has been
dull over the last 12 months as flows have reduced (see chart below).
Brewin shares are down 7% over 12 months. With a 5% yield they are
starting to look cheap.
Wealth – FY Results
Revenues down 6% to £8.8m. Losses of £3m in the core
business (2017 £1m). and a number of exceptionals for staff depatures and
debt and acquisition costs. Cash is £2.4m and there is a convertible debt
facility of £4.9m.
Forecasts are for £11.8m of revenue in the current year
but revenue came in at £8.8m versus an expectation showing on my screen as
1.3X revenue. Charles Stanley is valued at 0.5X revenue
This is a small company with big ambitions in the
global wealth sector and private equity style facilities to help it get
there. I suspect it will try and do too much too quickly and suffer
a number of accidents. The high staff turnover would suggest the staff
think so too. Note to self: stand at safe distance.
Net outflows of 0.6% over the quarter to March but AUM
was up 4% to $112.3bn. The most significant culprit was the discretionary
long only portfolio driven by global, Japanese and US equity strategies
where net outflows were $1.8bn. Fund performance is variable but the
majority are in positive absolute territory in Q1.
Are based on 5% revenue growth for the year to December
2019 which looks sensible with AUM flat on last March.
PER 10.4 Yield 5.8%. EV/AUM 2.0%
I admire the reinvention of a business that was mainly
AHL a few years ago and having invested the cash flow in acquisitions AHL
is now under 20% of the AUM. There may be a time it can reinvent itself
but it still looks a little early. Hard to see the catalyst just now.
Capital – Trading Update
Net inflows of 0.5% is a turn round from last quarter
when outflows were 6.7%. AUM up 9% to £13.8bn. Over 12 months the AUM is
For the year ahead a reduction in revenue is expected
of £22m which is the performance fees of £23.6m not expected to recur in
year to March 2020.
PER 12.8X yield 6.4%. EV/AUM 2.7%
This is a volatile youth. The shares could be very
cheap if the funds perform. The UK absolute return fund has proved to be
very market sensitive which may take some time to recover from.
Momentum may take time to rebuild but the shares are cheap.
Stanley – Trading Update
FuMA was up 5.7% over the quarter to £24.1bn.
March 20 forecasts look for 1% revenue growth but 20%
earnings growth despite the fact that margins are expected to be under
PER 14.9X yield 4.0%
The company’s 15% margin target remains elusive. With
the company achieving 8% ROE its hard to see the attractions.
Financial Markets Consulting – Pre Close Update
Revenue and EBITDA expected to be in line with
Anticipate 15% revenue growth to £76m and 11.6p EPS
PER 19X and yield 2.5%.
Expensive for a consultant that charges premium rates to fund managers.
But it continues to deliver strong growth and changes in the financial
markets show no sign of letting up. Just hard to see the positive
As Pinterest prices at the lower end of expectations
which at $12bn is below its private fund raise valuation I find myself
watching this graph that shows that 40% of Russell 2000 companies are loss
making. Admittedly there were more loss makers in 2003 and 2009 but that
was because of EPS. This time its because capital is priced down rather
– Trading Update
5.2% net inflows in the quarter resulting in a 13%
increase in AUM to £12.7bn. Economic advantage team gets a mention (49%
AUM) but the fixed income team have brought in £419m in the first year and
the increasingly fashionable sustainability team (29% AUM) gets a mention.
Fund performance remains generally strong
The 5% revenue increase anticipated should be a walk in
the park for the year to March 2020 in the context of a 21% increase in
AUM over the last 12 months.
PER 12.3. Yield 4.4%. EV/AUM 2.2%
If we assume EPS should be 55p rather than the 49p
forecast for the current year and put it on 15X that would be 800p per
share against the current 607p.
Group – Trading Update
Update Net inflows of 0.1% result in AUM up 5.1% over the three month period to £4.6bn. Over 12 months the AUM is up 12%.
Following a downgrade in February current year
estimates assume a revenue decline in the current year. Looks too
PER 13.7X yield 3.7%. EV/AUM 1.7%
The valuation is low but this is an earnings play more
than a valuation play. As the company garners more AUM the margin
will grow as well as the valuation. In general the reporting fund
managers are performing well. But Polar and Jupiter are taking a little
longer to add up their numbers.
Topping – FY Results
Revenue up 5.5% to £7.7m has resulted in a decline in
operating profit to £1.7m following a year of investment. AUM was up
3.6% over the year to £779m. Outlook is optimistic with current trading
said to be encouraging. Net cash equivalents was £2m
Dec 19 estimates are for £2.1m PBT and 2.4p EPS from
PER 11.7X yield 6.4%
Lighthouse has just been taken over at 18X multiple. At
this valuation I suspect either the company will grow or succumb to a
rival. Both outcomes would be attractive to shareholders. And
hats off to the company for getting “Impact investing”, “Digital innovation”
and “challenger” into the commentary.