Magellan Financial Group Limited

MFG Details

Managerial Changes: Magellan Financial Group Limited (ASX: MFG) is engaged in funds management to offer international investment funds to high net worth and retail investors. The company recently announced that Brett Cairns has ceased to be a director in the company and has resigned as Chief Executive Officer, effective from 6 December 2021. Notably, the company appointed Ms Kirsten Morton as the company’s interim Chief Executive Officer (CEO).

Digging Into FY21 Key Results:

• The company has a diversified client base, with more than 130 institutional clients, out of this, only four institutional clients represent greater than 2% of total management and services fees.
• During FY21, the company witnessed a growth of 9% in average funds under management, which came in at $103.7 billion.
• Profit before tax and before performance fees for the year amounted to $526.6 million, indicating a growth of 10% over pcp, supported by a rise in average funds under management as well as cost efficiencies.
• In FY21, revenue from management and services fees inclined by 7% and stood at $635.4 million.

Average Funds Under Management Highlight (Source: Analysis by Kalkine Group)

Key Risks: Rising transparency and several existing investment professionals and companies with new tailored products may expose MFG to high competition risk. MFG’s business model is exposed to a more complex regulatory environment; any failure may lead the business to fines, penalties etc.

Outlook: For FY22, the company expects funds management business expenses to be between $125-130 million. MFG is focused on expanding its Funds Management business outside of its global equities franchise to enhance the quality of business. The company has scheduled to release its 1HFY22 results on 17 February 2022.

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of MFG is trading close to its 52-week low level of $28.03. The stock has been corrected by ~43.26% in the past six months. The stock has been valued using the P/BV multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at some discount to its peers, considering the high reliance on global equities, which exposes MFG to high market movements, stiff competition, regulatory risks, etc. For the purpose of valuation, peers such as Pendal Group Ltd (ASX: PDL), Perpetual Ltd (ASX: PPT), Platinum Asset Management Ltd (ASX: PTM), and others have been considered. Considering the expected upside in valuation, robust fund performance, prudent liquidity position, rise in FUM, rising bottom line, decent outlook, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing market price of $28.85, up by ~0.243% as on 16 December 2021.

MFG Daily Technical Chart, Data Source: REFINITIV  

Wisr Limited

WZR Details

AGM Update: Wisr Limited (ASX: WZR) is involved in the consumer lending business and underwrites personal loans and secured vehicle loans for 3, 5, and 7-year maturities. The Group is focused on enhancing the digital lending experience of its consumers.

• The company’s lending platform is delivering robust results, with revenue growing 280% year over year in FY21. Notably, in 1QFY22, WZR’s revenues skyrocketed 195% on pcp. The revenue structure has put WZR on a run rate approaching over $50 million for the coming year.
• On the heels of 21 successive quarters of loan origination growth, the company remains on track to drive significant revenue growth in FY22 & beyond. Notably, in Q1FY22, the company recorded $132 million in loan origination, up 113% year over year. The total loan went up by 142% on pcp in 1QFY22.
• The company remains well capitalised with $55.1 million in unrestricted cash and liquidity loan assets at the end of 1QFY22. WZR’s Warehouse and Freedom Trust stood at $475 million, depicting a rise of 247% year over year.

Robust Loan Book Growth Highlight, Analysis by Kalkine Group

Risk Analysis: The company’s line of business is highly vulnerable to credit and receivable risks. Further, its profitability has crucial dependence on its access to funds at promising rates.

Outlook: The company expects to witness surged demand in the personal finance market as lockdown impact lifts. With WZR warehouse facilities in operation, WZR stands in a strong financial position and focuses on achieving a loan book well beyond $1 billion.

Valuation Methodology: Price to Book Value Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of WZR gave a negative return of ~17.99% in the past three months. The stock is currently trading lower than the 52-weeks average price level band of 0.175 - $0.340. The stock has been valued using the Price to Book Value multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at a slight premium to its peers, considering the rise in loan originations, favourable funding terms from warehouse facilities, etc. For valuation, few peers like Zip Co Ltd (ASX: Z1P), Moneyme Ltd (ASX: MME), Plenti Group Ltd (ASX: PLT) have been considered. Considering the indicative upside in valuation & current trading levels, growth in revenues & loan origination, new funding warehouse facilities, decent outlook, and key risk associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.200, as of 16 December 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

WZR Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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