In today’s daily we have covered stock research on BT Investment Management (Expensive).

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S&P 500 was up 3.39points or 0.17%on Friday and closed at 1962.87. U.S. stocks rose on Friday, driving the Dow and the S&P 500 to close at record highs as the shares of 330 companies hit 52-week highs on the New York Stock Exchange. Oracle Corp shares dropped 4 percent to $40.82 and ranked among the biggest drags on the S&P 500. The stock's slide came a day after the software maker posted fiscal fourth-quarter results that disappointed investors looking for more progress against rivals selling web-based services.

The CBOE Vix volatility index bounced off a seven year low but remained at a historically low level. The chief driver of market action this week came from the Fed as its relatively dovish policy statement on Wednesday helped calm concerns over recent signs of inflationary pressures in the US economy. Gold hit a two month high on Thursday of $1321 an ounce and while it slipped $5 on the following day it was still up $38 over the week putting it on course for its best week in four months.


S&P 500 Daily Chart (Source – Thomson Reuters)

 
S&P ASX 200was down by 48.7 points or 0.89% on Friday and closed at 5419.5 points. Aquila resources has recommended the takeover proposal of Baosteel and Aurizon to its shareholders. Pryme Energy’s securities were placed in a trading halt pending the release of an announcement by the company. CK ENV Investments a company owned by Cheung Kong group of Hong Kong announced the launch of it’s recommended off market takeover offer for Envestra Limited for A$1.32 cash per share. ELK petroleum has advised that the sale process for its Wyoming Assets has commenced. Galileo Japan Trust has announced dividend distribution of 7 cents per unit with ex-dividend date of 26^th June 2014.


ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 



Stock of the Day – BT Investment Management (BTT)
 
BT Investment Management’s strong first half performance confirmed our positive view on the wealth manager. Leveraging a sticky customer base, brand and investor performance, BT Investment Management continues to grow funds under management or FUM hence increasing the constant stream of profitable fee income it receives. Higher markets, increased funds under management  or FUM, performance fees and net inflows all working in unison to drive a 143% increase in cash net profit after tax or NPAT to AUD 83.1 million in first half fiscal 2014.


BTT Financial highlights (Source – Company Reports)

Strong investment performance saw a substantial increase in performance fees to AUD 115 million, from only AUD 34 million in first half 2013. Performance fees sourced from the firm’s UK subsidiary are paid annually and will not repeat in the second half. Base management fees beat our expectations with a 40% increase to AUD 138 million due to a favorable shift in the asset mix to higher margin retail funds.


BTT Dividends (Source – Company Reports)

At current stock prices the stock is slightly expensive. We now believe a combination of lower asset allocation to cash and fixed income and an increase in funds sourced from higher margin retail investors can largely offset these pressures. Base management fees for the group increased to 45 basis points in the first half of fiscal 2014from 40 basis points a year earlier. 


BTT Daily Chart (Source – Thomson Reuters)

While everything is seemingly going BT Investment Management’s way, it is important to note how favorable the underlying conditions have been. Australian and global equity markets rose 12% and 15% respectively during the period. The weaker Australian dollar down 15% against the GBP increases the Australian reported earnings derived from offshore. We believe the stock is expensive at its current price and would review the stock at a later date.

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