In today’s daily we have covered stock research on PLATINUM ASSET MANAGEMENT (SELL).









 
The S&P 500 was down by 14.55points or 0.70% on Monday to 2060.82 points. U.S. stocks fell on Monday, putting the S&P 500 on track for its biggest daily percentage decline since October, asenergy shares fell with oil prices and global growth concerns rose following soft data out of China and Japan. Data showed China's exports grew at a slower-than-expected pace and imports dropped 6.7 percent in November, while Japan's economy shrank more than expected in the third quarter.

McDonald's shares lost 3.7 percent after the fast-food restaurant chain reported a steeper-than-expected fall in global same-restaurant sales in November and said fourth-quarter results would be hurt by a supplier scandal in China and a stronger dollar.  Japan's economy shrank more than initially reported in the third quarter on declines in business investment, data showed on Monday, surprising markets and backing premier Shinzo Abe's recent decision to delay a second sales tax hike.




McDonald's Daily Chart (Source – Thomson Reuters)
S&P ASX 200was up by 37.4points or 0.77%on Monday and closed at 5372.7 points. Commonwealth Bank of Australia and ANZ Banking Group each rose 0.9 per cent to $82.39 and $32.40 respectively, while Westpac Banking Corporation lifted 1 per cent to $33.35. National Australia Bank jumped 1.8 per cent to $32.97. The smaller regional lenders moved lower. Bendigo & Adelaide Bank dipped 0.2 per cent to $13. Bank of Queensland lost 1.8 per cent to $12.28, while Queensland-based banking and insurance group Suncorp shed 0.4 per cent to $14.33.
Australia’s biggest oil producer Woodside Petroleum lost 0.9 per cent to $35.39, after Brent crude oil dropped to $US68.17 a barrel – its lowest level since 2009. Resources giant BHP Billiton dipped 1.1 per cent to $30.10, while main rival Rio Tinto edged down 1¢ to $57.13. Skilled Group, a labour hire firm servicing the energy and resources industries. was the worst-performing stock in the ASX 200 plunging 15.9 per cent to $1.27.

Skilled Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
Stock of the Day - Platinum Asset Management (SELL)

Platinum Asset Management (PTM) recently showcased a strong balance sheet with amount of money under the funds under management (FUM) as the key variable for its business model and a significant determinant of profit.


Performance Returns to 30 September 2014 (Source – Company Reports)

The average amount of FUM increased from $16.8 bn to about $22 bn in FY14, which is an increase of 32.8%. Performance fees increased from $5.0 mn to $27.4 mn in FY14. Accordingly, the net profit after tax of $189.9 mn was achieved as opposed to $129.1 mn of 2013, which indicates an increase of 47.1%. As a result, the diluted earnings per share of 32.44 cents per share vis-à-vis 22.58 cents per share in 2013 were witnessed. The Company monitored its expenses quite closely and has few liabilities. The expenses mainly entail costs associated with FUM growth, incentive payments and staff costs.


Platinum International Fund Performance Graph (Source – Company Reports)
 
Primarily, the closing FUM at 30 June 2014 was $22.9 bn which was a result of investment returns that increased by $3.5 bn. Net capital flows increased by $0.2 bn. The flagship Platinum International Fund has appreciated 13.01% per annum in comparison to return from MSCI World Index of 5.60% since inception in 1995. As per the updates of 30 November 2014, PTM reported a portfolio value of $10.45 bn with regards to International Fund, $327.07 mn for Unhedged Fund, $5.18 bn for Asia Fund, $287.31 mn for European Fund, $455.88 mn for Japan Fund, $1.24 bn for International Brands Fund, $111.59 mn for International Healthcare Fund, and $67.63 mn for International Technology Fund.

The unhedged fund has benefited strongly over the last 12 months from being on the right side of changes taking place at the global level with contribution from Indian stocks outstanding. China and ASEAN also had meaningful impact.

The Company paid a fully-franked dividend of 20 cents per share on 23 September 2014 and 14 cents per share on 17 March 2014, resulting in a total of 34 cents per share. PTM has a dividend reinvestment plan which is yet to be activated.


Platinum’s Approach (Source – Company Reports)

The Company has decided against the launching of an Undertaking for Collective Investment in Transferable Securities Fund, which was to be an overseas domiciled fund. This decision comes in view of the ambiguity created by the existing Australian tax law regulating the offshore platform for global investors.


Platinum Asia Fund: Evolution of Exposure (Source – Company Reports)

The investment performance contribution of $3.5 bn lift to FUM growth helped in exceeding net growth in total FUM of $3.2 bn after adjusting for net new fund flows and net distributions. Net fund flows have strengthened the financial year. The Company expects that continued performance by global equity markets and downward pressure on the Australian dollar will help bring positive net fund flows into PTM’s investment products in the coming year. Weakness in the Australian dollar will enhance the dollar value of the Company’s FUM.


PTM Daily Chart (Source - Thomson Reuters)

PTM’s 1Q15 trading result has been better than expected but profit appears to be inflated by few non-recurring items. The expected performance fees is thought to contribute less than 10% to 1H15E pre-tax profits, as per the Company. The October 2014 FUM balance was lower than that of September 2014 although the fund inflows were marginally positive. The recent announcement with regards to resignation of Jacob Mitchell, the Deputy Chief Investment Officer and Portfolio Manager of the Japan Fund, is another blow to the performance of the Japan fund. There is still time before PTM fully monetizes the improvement in performance to bring back the flow momentum.

Accordingly, we put a SELL recommendation for this stock at the current price of $7.26.
 

 
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