Company overview - Platinum Investment Management Limited, trading as Platinum Asset Management (Platinum), operates a funds management business. The Company specializes in investing in international equities. Platinum manages approximately Australian dollar 22 billion with over 7% of this from investors in New Zealand, Europe, America and Asia. It offers regional and industry-specific funds in addition to global portfolios. It provides investment management services to its related party unit trusts - the Platinum Trust Funds and Platinum Global Fund; its offshore fund, Platinum World Portfolios Plc., and its two Australian Securities Exchange Limited (ASX)-listed investment companies (LICs), Platinum Capital Limited and Platinum Asia Investments Limited. Platinum's product range consists of global, regional and sector products for investment. Its Platinum Trust Funds include Platinum International Fund, Platinum Unhedged Fund, Platinum Asia Fund, Platinum Japan Fund and Platinum European Fund.

PTM Details
Mixed performance for funds under management given volatile markets: Platinum Asset Management Limited (ASX: PTM) reported that its funds under management slightly rose to $23,081.3 million during November, 2016 as compared to $23,042 million in October 2016. Funds under management further improved to $23,178 million during December 2016 as compared to $23,081.3 million in November, 2016. But the funds under management remained almost flat at $23,135.8 million in January 2017 against $23,178 million in December 2016. Moreover, the group reported that they have been witnessing modest fund outflows due to subdued markets in the first four months of the 2017 financial year. On the other hand, despite this pressure, the group’s PTM Funds performance has been solid as compared to their index benchmarks. Platinum International Fund surpassed the global benchmark by 5% during four months since 30 June 2016. But the ongoing volatility in the markets could impact their funds under management performance, wherein the group expects their first half of the 2017 fiscal year’s PTM revenues to be flat as compared to the earlier June 2016 half year. 


Platinum International Fund (Source: Company Reports) 
Trying to deliver better long term performance against benchmarks: Platinum Asset Management Limited have been generating stable long term returns against their indices even during volatile times. Platinum International Fund generated 12.5% per annum (pa) returns since inception (as at 31 January 2017) as compared to 6.3% returns of MSCI AC World Net Index in A$. Platinum Japan Fund delivered 15.0% pa returns against 9.6% returns at MSCI AC Asia ex Japan Net Index in A$. Platinum European Fund reported 11.5% pa returns as compared to 2.1% returns of MSCI AC Europe Net Index in A$. Platinum International Health Care Fund rewarded 8.9% returns from inception as compared to 8.1% pa returns of MSCI AC World Health Care Net Index in A$. Platinum Asia Fund generated 14.5% returns since inception as compared to 9.6% returns generated from MSCI AC Asia ex Japan Net Index in A$. Platinum International Technology Fund delivered 8.9% pa returns against negative returns of 1.4% generated by MSCI AC World IT Net Index in A$.
 
Rising staff costs to retain talent: The group’s staff costs rose during the 2015/16 financial year by $2.5 million to retain talent leading to a better performance. But this incentive pool was relatively flat year on year, and almost in line with revenue growth. The group pays bonuses based on their ability to deliver solid returns or achieve outperformance against benchmark returns over a one and three-year period. However, given the volatile absolute and relative performance across their Funds and mandates, the group’s bonuses for investment team were subdued in 2016. Moreover, the group’s Chief Investment Officer, Andrew Clifford was not given bonus for 2016. Meanwhile, the group’s new Deferred Bonus Plan was approved by the Nomination and Remuneration Committee, through which the group intends to recognise the contributions made by senior employees and to retain their skills within the firm. Selected senior employees could defer a proportion of their bonus and instead get deferred rights. The group deferred rights were worth of over $3.6 million to PTM shares during the previous financial year. On the other side, the management is “optimistic” on their future prospects.
 
Softness in fiscal year of 2016 performance: Platinum Asset Management performance for fiscal year of 2016 entailed group’s fee revenue falling 0.9% to $337.9 million during the period as compared to $340.9 million in the prior corresponding year. This was mainly due to the softness in average Funds under Management performance which fell by 1.2% to $25.8 billion during the period as compared to $26.1 billion in 2015.  Overall revenue fell by 4.4% or $15.7 million to $344.7 million from $360.4 million in 2015 impacted by declining non-fee income, including mark-to-market losses on their investment in Platinum Asia Investments Limited which lost $1.5 million. Platinum World Portfolios fell $1.4 million due to falling Australian Dollar fluctuations and non-repeated investments during 2016.  However, the costs rose 6.1% or $3.6 million against the prior corresponding due to rising staff and business development costs. Profit before income tax expense was $282.2 million during the year as compared to $301.6 million in 2015 which is a fall of 6.4% against the earlier year. The profit after tax also fell 6.4% during the year.
 

Funds under management in fiscal year of 2016 (Source: Company Reports) 
Strengthening core brand value: The group is constantly focusing on their core “Platinum” brand and accordingly undertook several initiatives to enhance and grow their business. The group launched two products in Australia and overseas, to diversify their investment portfolio into global shares. First product is Platinum Asia Investments Limited (ASX code: PAI), a new Listed Investment Company (LIC), which is a SMSF focused product that raised over $292.8 million and listed on the ASX on 21 September 2015. Second product is the three new Irish-domiciled UCITS (Undertaking for Collective Investment in Transferable Securities) funds under the umbrella of Platinum World Portfolios plc (PWP), which are designed to attract larger global institutional investors and extend the Platinum brand name into offshore markets. Meanwhile, the group is taking several strategies to retain and attract new investors given the volatility in the global markets. PTM is strengthening their investment specialists to enhance their communication as well as developing new marketing strategies for its products.
 
Maximizing shareholder value: Despite volatile fiscal year of 2016 performance, management focused on shareholders’ value and declared a fully-franked ordinary dividend of 16 cents per share which was paid in September 2016. The group also paid an interim dividend of 16 cents per share in March 2016. The group also declared an on-market share buyback program in September 2016. The group intends to leverage the levels of PTM shares indicating their long-term confidence on the group. Management intended to maintain the dividends and be in their targeted 80-90% of its profit after tax payout ratio during the buy-back period.
 
Stock performance: Platinum Asset Management stock price fell over 16.1% in the last six months (as of February 10, 2017) given the volatile performance of the markets which led to some of the group’s products to underperform in the short term. For instance, Platinum International Fund delivered a lower 3.7% returns in the last three months (as of January 2017) as compared to MSCI AC World Net Index in A$ with 6% returns during the period. Platinum Asia Fund performance fell 0.4% in the last three months (as of January 2017) as compared to 1.3% returns in MSCI AC Asia ex Japan Net Index in A$. The investors were thus concerned on whether the hefty pay structures to the portfolio managers were justified or not. On the other hand, the group is addressing the concerns by controlling bonuses and other costs. Moreover, barring some products, others are generating better returns or less losses as compared to the benchmark indices. For instance, Platinum International Fund fell over 0.7% in the last one month against the MSCI AC World Net Index in A$ loss of 2% (as of January 2017). Platinum European Fund delivered 9% returns in the three-month period against MSCI AC Europe Net Index in A$ returns of 5.5% during the same period. The group is expected to release its results in February 2017. Meanwhile, the stock has a solid dividend yield while the recent stock fall placed them at lucrative levels. We give a “Buy” recommendation on the stock at the current price of – $5.08

 
PTM Daily Chart (Source: Thomson Reuters)

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