In today’s daily we have covered stock research on Perpetual (Expensive). 












 
The S&P 500 was up by 24.00 points or 1.29 %on Friday  to 1886.76 points. U.S. stocks extended their rebound from this month's bruising selloff on Friday, giving the S&P 500 its best day in over a week, as worries about the U.S. earnings outlook eased, but the S&P 500 still posted its fourth straight week of declines. For the week, the Dow and S&P were down 1 percent while the Nasdaq was down 0.4 percent.

Schlumberger Ltd., the largest oilfield-services provider, jumped 3.7 percent after reporting earnings. Morgan Stanley (MS) added 2.1 percent as third-quarter profit almost doubled. Urban Outfitters Inc. sank 14 percent. European equities, peripheral Eurozone bonds, and industrial commodities also regained ground as dovish central bank comments offered some much needed reassurance to investors spooked by the turbulent price action of recent sessions.



Morgan Stanley Daily Chart (Source – Thomson Reuters)
S&P ASX 200was up by 16.8points or 0.32%on Friday and closed at 5271.7 points. Shares in Network Ten Holdings finished the week flat at 20.5¢. Ten reported a full year loss of $168 million following the write-down on its television licences. For the week, Wesfarmers shares rose 0.5 per cent to $41.02 despite the Australian Consumer and Competition Commission launched further legal action against Coles. Virgin Australia will buy the final 40 per cent of Tigerair that it doesn’t already own for just $1, but it will take on the budget airline’s losses as well. SPI futures were up 68 points to 5305 on Saturday morning.

Sonic Healthcare shares finished the week 1.5 per cent higher at $17.28 after the company announced it had won an Alberta (Canada) government contract to provide pathology services. Tabcorp shares surged 6.6 per cent for the week to finish at $3.71 following a quarterly update which showed revenue had jumped by 6.6 per cent to $537.4 million. Iron ore is up 0.1 per cent at $US80.60 a tonne.
 

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




 
 
Stock of the Day – Perpetual Limited (PPT)
Perpetual’s fiscal 2014 underlying performance is solid and more importantly key earning drivers are trending in the right direction. Ownership of the Trust Company for seven months boosts revenue and profit increasing 19% and 37% respectively. But when excluded higher funds under management or FUM benefits of a cost out program and cost restraint result in organic revenue growth of 9% and profit growth of 30%.

Revenue + NPAT (Source - Company Reports)

While 70% of FUM growth was driven by stronger markets. Perpetual’s return to inflows for the first time in seven years has been sustained. In addition to improving investor confidence the firm is benefiting from greater investment in distribution to increase representation on adviser approved product lists, model portfolios, platforms and having funds rated. To retain and grow funds performance remains crucial particularly in the competitive Australian equity space.


Diversified Financial (Source -  Company Reports)

Perpetual’s performance remains impressive with 100% of funds ranked in the first and second quartile during the past year, and 97% and 95% over three year and five year periods. However the international share offering which is externally managed by Wellington, is an outlier, consistently in fourth quartile. Fiscal 2015 is shaping up to be another year with a higher FUM starting base and AUD 900 million of inflows in fiscal 2015 to date.


PPT Daily Chart (Source - Thomson Reuters)

Average FUM for Perpetual Investments the asset management division, increased 15% to AUD 28.7 billion in fiscal 2014, supporting a 30% increase in earnings before interest and tax  or EBIT to AUD 114 million. Despite being the bread winner contributing 71% of group EBIT benefitting from AUD 1.1 billion of net inflows, it did incur a small 1 basis point reduction in the average management margin to 76 basis points. We continue to assume a gradual decline in margins as competition from lower cost investment options and pressure on the cost of advice mount. We like the perpetual story but we believe the stock is expensive at the current price and would review the stock at a later date.

 
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