Pinnacle Investment Management Group Limited

A Look at PNI’s Funds under Management: Pinnacle Investment Management Group Limited (ASX: PNI) is into funds management business. The market capitalisation of the company stood at ~$782.68 Mn as on 5^th July 2019. Recently, the company with the help of release dated 7^th June 2019, stated that the proceeding has been resolved on confidential terms by Riparian Capital Partners Pty Ltd, Blue Sky Alternative Investments Limited, the former Blue Sky employees and PNI.The fund under management at 30^th April 2019 of PNI amounted to $52.1Bn (which includes $10.9 Bn of retail) against $46.7 Bn at 31 December 2018.The company’s cash position and principal investment amounted to $47.6Mn, which includes an investment of $37.1 Mn in strategies which are managed by Pinnacle Affiliates. The company reported revenue of $7.5 Mn in 1H FY19 in comparison to $6.0Mn in 1H FY18, reflecting YoY growth of 25% and net profit after tax from continuing operations stood at $10.1Mn in 1H FY19 against $8.1Mn in 1H FY18.

Financial Summary for 1H FY19 (Source: Company Reports)

What to Expect: PNI is well placed to witness a superior business and financial performance in the medium term. The company had invested, and it would continue to invest, in Horizon 2 initiatives, with this investment for growth preceding resulting revenues. The company has been deploying towards the diversified platform in order to strengthen future growth.

Stock Recommendation: The net margin of Pinnacle Investment Management Group Limited stood at 117.8% in 1H FY19 as compared to the industry median of 20.4%, which represents that PNI is effectively converting its topline into the bottom line. When it comes to shareholders return, PNI reported ROE of 7.7% in 1H FY19 against the industry median of 2.5%. This implies that PNI is providing better returns to shareholders as compared to the broader industry. On the stock’s performance front, it produced a return of -18.40% in the time span of three months. As per ASX, the stock is trading closer towards its 52- weeks lower level, indicating a decent opportunity for accumulation. Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$4.390 per share (up 2.57% on 5^th July 2019).
 

Navigator Global Investments Limited

Asset Under Management:Navigator Global Investments Limited (ASX: NGI) is a parent company of Lighthouse Investment Partners, LLC. The market capitalisation of NGI stood at $659.94 Mn as on 5^th July 2019.  Recently, the company, via release dated 18^th April 2019, updated the market about asset under management and investment performance. In the same release, the company stated that total asset under management has been estimated at US$14.89Bn as on 31^st March 2019 in comparison to AUM of US$14.72 Bn as on 31^st December 2018.


Total AUM for March 2019 (Source: Company Reports)

Previously, the company reported total asset under management amounting to US$14.7 Bn in 1H FY19 and net outflow of US$1.4Bn in 1H FY19.NGI reported EBITDA of US$20.1Mn, which was the highest EBITDA for a half recorded for 1H FY19.

Future Prospects: Navigator Global Investments Limited is positive towards new mandate opportunities and it anticipates an elongation of the sales process at least theshort term. NGI anticipates that it would continue to witness some redemptions from MAS transitioned assets over the short-term. The company expects that reduction in AUM in 1H FY19 would have the impact of reducing management fees for 2H FY19 by around 10%. The company stated that EBITDA margin related to revenue earned from the transitioned MAS assets would grow to match the normal EBITDA margin of the Lighthouse business by FY 2021 end.

Stock Recommendation: The company’s balance sheet remains solid with a cash balance of US$29.3Mn. NGI had set a policy of paying a dividend of 70% to 80% of EBITDA.It reported a gross margin of 92.2% in 1H FY19, reflecting YoY growth of 1.0% and a net margin of the company stood at 25.0% in comparison to the industry median of 20.4%. The higher net margin indicates that Navigator Global Investments Limited is effectively converting its topline into the bottom line. With respect to stock’s past performance, it generated returns of 27.36% and -1.46% in the time span of three months and six months, respectively. Based on the foregoing and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$4.050 per share (down 0.491% on 5^th July 2019).  

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