Create Free Account

By creating account you will get access to hot stocks & personalised emails

Mid-Cap

Magellan Financial Group + Slater & Gordon Ltd – Two Growth Stocks

October 08, 2015 | Team Kalkine
Magellan Financial Group + Slater & Gordon Ltd – Two Growth Stocks

Magellan Financial Group Ltd (ASX: MFG)


 
Magellan Financial Group Ltd’s funds under management (FUM) has increased $17.2 billion since July 2012 which is a growth of more than 500%. The highly impressive growth has been driven by strong outperformance, the structural shift in the investment portfolio towards global equities, favourable market conditions and the weakness of the Australian dollar. The majority of its funds are invested outside of Australia and are unhedged, which results in a favourable exposure to the declining Australian currency and also offering higher returns because investments such as global equities, have also been encouraged by low interest rates. The Australian fund management industry is characterised by mandated growth in the superannuation industry, with contributions set to rise from 9.25% of gross salary to 12% by 2019. Retail inflows have grown substantially because of investments in distribution and marketing aimed at investors who lack the time, expertise and objectivity to manage their own wealth. The terms of investment by fund managers are particularly attractive to small investors who cannot build their own portfolios by direct investment. Fund managers remain attractive to investors because of their relatively low fixed cost base.


Net Monthly Flows and Unit Holders (Source: Company Reports)
 
The results for FY 2015 show a 55% growth in funds under management to $ 31.0 billion, a 110% growth in net profit to $ 174.3 million, a 108% growth in EPS to 101.8 cents per share and a 96% growth in dividends to 74.9 cents per share fully franked. The fund management business produced revenues of $ 255.9 million for the year and profit before tax of $ 203.3 million an increase of 98% from the previous year. The cost to income ratio declined to 24.8% compared to 26.7% in the previous year reflecting the scalability and the efficiency of the business model. The dividends are in line with management policy of paying out 75% to 80% of the net profit after tax from the fund management business.


Service Fees and Institutional Clients (Source: Company Reports)
 
The CEO and Chief investment Officer Hamish Douglass said that this was another successful year for the company said that the results reflect continued commitment to clients and strong investment performance aimed at the long-term. It has been particularly pleasing to note the strong performance from the key global equities and infrastructure strategies. The Magellan Global Fund returned 29.5% per annum and 19.6% per annum over the past one year and five years net of fees. The Magellan Infrastructure Fund returned 12.3% and 18.4% over the past one year and five years net of fees. There is also been early and strong investor interest in the Magellan Global Equities Fund which has attracted more than 4600 investors since inception and grown to $ 257 million in funds under management. The Magellan Global Equities Fund (currency hedged) has recently been launched providing investors with the flexibility to manage their foreign exchange exposure. Meanwhile, the company continues to build its business in the Australian market with substantial progress in the aligned advisory market entering into arrangements with AMP and BT/Westpac. Relationship have also been strengthened with investment advisers in Australia of whom around 9500 use Magellan funds.


MFG Daily Chart (Source: Thomson Reuters)
 
We believe that the impressive track record and the proven investment prowess remains good reasons to invest and recommend a buy at the current price of $20.41.
 

Slater & Gordon Limited (ASX: SGH)


 
The company reported a strong operating and financial performance for the year ended 30 June 2015 with EBITDA, revenues and cash flow in line with the guidance issued earlier. Total revenue was up 27% to $ 521.9 million, EBITDA was up 20.7% to $ 121.6 million with an EBITDA margin of 24.5% compared to 25.1% in the previous year, net profit after tax of 7.7% to $ 70.7 million and net operating cash flow/net profit after tax of 73.6% compared to 86.3% in the previous year. Net debt as at 30 June 2015 was $ 623 million and the gearing ratio measured as net bank debt/equity was 43%. The directors have declared a final dividend of 5.5 cents per share franked to 40%, which is a 10% increase over the previous year.
 
Highlights
 
In the United Kingdom, the Personal Injury Law took advantage of its emerging brand presence in the country with a robust increase in new cases including in the area of multitrack (significant injury). The general law practice is building up momentum to become a leading provider of specialised personalised legal services. More than 95% of the staff at the firm now work with a common practice and case management system with the remaining staff due to transfer by the end of the first half of FY 2016. The company successfully completed capital raising and the transaction involving the Professional Services Division in line with expectations.


EBITDAW and Gross operating cash flow (Source: Company Reports)

In Australia, the PIL practice showed strength and resilience with strong underlying growth in fee revenue after adjusting for the anticipated poor performance in Queensland which is also now stabilising. The GL practice performance was in line with expectations and EBITDA continues to grow. The performance of acquisitions was in line with expectations and is on track to complete the process of integration in FY 2016. Overall, the Australian business showed an improvement in client satisfaction and a strong operating cash flow result demonstrating a trend of improvement as it emerges from its initial investment phase.



EBITDA (Source: Company Reports)
 
Group managing director Andrew Grech said that he was pleased with the financial results for FY 2015 and it is gratifying to see the amount of effort put in translating into better brand awareness and customer satisfaction. The firm now has a commanding market share in both Australia and the UK and, with freedom from the short-term acquisition activity, management will be able to concentrate on improving operating effectiveness. The guidance for FY 2016 includes total group fees (including SGS) in excess of $ 1.15 billion, total group EBITDAW in excess of $ 205 million and gross operating cash flow to EBITDAW of 100%.
 
The recently released audited fiscal 2014 and 2015 accounts reflect changes in terms of adjustments and corrections for improving the financial disclosure. NPAT witnessed a rise of AUD 1.4 million in 2015 and net assets witnessed a dip of AUD
14.5 million. Fiscal 2014 NPAT and net assets stand revised down by AUD 9.6 million.
 
It has not been easy for investors as the company became the subject of investigations over the last couple of months. However, the good news is that the company is continuing to cooperate in the extensive reviews carried out by the Australian Securities and Investment Commission. Secondly, the company has decided to reclassify some balance sheet items including items featuring in the recent investigations. There are also issues regarding any impact from the Volkswagen (VW) scandal. However, we believe that the future outlook for growth is positive for SGH and there could be an upside in the stock price and we accordingly rate the stock as a Buy at the current price of $2.95.


SGH Daily Chart (Source: Thomson Reuters)

Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people.Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation.Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product.The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
Copyright
Copyright © 2015 Kalkine Pty Ltd ABN 34 154 808 312. No part of this website, or its content, may be reproduced in any form without the prior consent of Kalkine Pty Ltd.
Kalkine is a trading name of Kalkine Pty Ltd ABN 34 154 808 312, which holds Australian Financial Services Licence No. 425376.




Small-Cap
One Energy Stock Focused on Strengthening Asset Reliability and Driving Organic Growth -KAR
November 26, 2024Team Kalkine
Mid-Cap
Technical Analysis on One ASX-Listed Stock – CIA
November 25, 2024Team Kalkine
Blue-Chip
Key Business Insights on this Consumer Staples Company– TGT
November 25, 2024Team Kalkine
Small-Cap
One NASDAQ- Listed Movies & Entertainment ADR Under Radar- iQIYI, Inc
November 22, 2024Team Kalkine
Blue-Chip
One Internet Services & Infrastructure Stock Near Resistance Levels – SNOW
November 22, 2024Team Kalkine

Get In Touch

By submitting your details and clicking on the Register button below, you agree to Kalkine’s Terms and Conditions and agree to receive marketing offers, including to be contacted by email or phone, as set out in our Privacy Policy. Any calls will be made by Kalkine Pty Ltd or Kalkine Solutions Private Limited on our behalf.You also agree that Kalkine/KSPL can give you its Financial Services Guide by electronic means (including by website link or email). Before accessing our services, please read the Financial Services Guide available here.

Please wait processing your request...

Our Company

Useful Links

Contact Us

ISO Certified Market Research

Kalkine Solutions Private Limited, authorized representative of Kalkine Pty Ltd, holds ISO 27001:2022 certification bearing Certificate No.- IC-IS-2404072

Our Company

Useful Links

Contact Us

Disclaimer

The information given by Kalkine Pty Ltd ABN34 154 808 312 (Australian Financial Services License Number 425376) on this website is general information or advice only.

It does not take into account any of your personal objectives, circumstances or needs. Choosing an investment is an important decision. If you do not feel confident making a decision based on the recommendations Kalkine has made in our reports, you should consider obtaining personal advice from an authorised adviser.

There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. Terms & Conditions have been provided for our services, please go through them and also read our Financial Services Guide.

Our website may contain information on past performance of particular investments. Past performance is not an indicator of future performance. Hypothetical returns may not reflect actual performance. Any displays of potential investment opportunities are for sample purposes only and may not actually be available to investors.

The information on the website does not constitute an offer to sell securities or a solicitation of an offer to buy securities. Our reports contain general recommendations to invest in securities.

Copyright 2024 Krish Capital Pty. Ltd. All rights reserved. No part of this website, or its content, may be reproduced in any form without our prior consent.