Stocks’ Details

Magellan Financial Group Limited

Funds Under Management:Magellan Financial Group Limited (ASX: MFG) is in the business of fund management with the objective of offering international investment funds to high net worth and retail investors in ANZ and institutional investors globally. The market capitalisation of the company stood at ~A$9.23 Bn as on 21^st November 2019. The company recently announced that Brett Peter Cairns has made a change to holdings in the company by acquiring 103,092 ordinary shares at the consideration of $48.50 per ordinary share on 14^th November 2019. As at 31^st October 2019, total FUM of the company stood at A$93,544 million as compared to A$92,072 million 30^th September 2019.
In FY19, MFG witnessed a rise of 39% in the profitability of the Funds Management Segment, which was primarily fueled by a rise of 31% in revenues due to an increase of 28% in average funds under management and a more than doubling of performance fees to $83.6 million. The increase in profitability was also supported by positive operating leverage because of the modest increase in expenses of 4%.The following picture depicts an idea of key dates for 2020:


Key Dates for 2020 (Source: Company Reports)

What to Expect:Magellan Financial Group Limited would continue to pursue its financial objectives such as to increase the profitability of the Group over time by increasing the value as well as the performance of funds under management and seeking to grow the value of the MFG’s investment portfolio.

Stock Recommendation:MFG’s total dividends for the year stood at 185.2 cps for FY19 as compared to 134.5 cents per share last year, reflecting a rise of 38%. On the valuation front, MFG’s stock has a price to book value multiple of 12.6x as compared to the industry median (Financials) of 1.3x on TTM basis. The stock of MFG is trading at a price to earnings multiple of 23.75x against the industry median (Financials) of 14.7x on TTM basis. On YTD basis, the stock has gained 116.56% and is trading towards the 52-week high levels. Notably, the company is expected to report its half-year results to December 31, 2019 on February 13, 2020 that will be one of the key events to watch out for. Thus, we have a wait and watch stance on the stock at the current market price of A$48.000 per share, down 5.157% on 21^st November 2019.
 

Platinum Asset Management Limited

Chairman’s Address to Shareholders:Platinum Asset Management Limited (ASX: PTM) is a fund manager which specialises in investing in global equities. The market capitalisation of the company stood at ~A$2.52 Bn as on 21^st November 2019. The Chairman of the company recently addressed the shareholders at 2019 Annual General Meeting and stated that the financial year 2019 has been challenging for PTM with investment returns for most of its managed funds as well as portfolios lagging the broader market for the twelve months to 30 June 2019.

As at 30^th June 2019, Funds Under Management stood at $24.8 billion, reflecting a fall of 4% from $25.7 billion in FY18. The decline in FUM was because of the net fund outflows amounting to $246 million, in combination with the net cash distribution and other capital outflows of $908 million of 30 June 2019, which were partially offset by positive market returns of $224 million. However, as at 31^st October 2019, the funds under management stood at $ 24,595.93 million against $24,612.68 million as at 30^th September 2019. The below picture provides an overview of financial metrics:


Financial Metrics (Source: Company Reports)

Future Aspects:The business of PTM remains resilient and is well placed for future growth, domestically and internationally. PTM offers a highly differentiated investment style and maintains its unwavering focus on delivering strong, long-term investment returns for its clients. The company also maintains its strong brand in the Australian retail market, and its business is both profitable and scalable with a strong dividend capacity and an unleveraged balance sheet.

Stock Recommendation:The key personnel of the company stated that the ongoing uncertainty in the US/China trade war and bleak prospects for future economic growth caused investors in global equity markets to remain nervous, even as markets continued to appreciate in value. On the valuation side, the stock of PTM is trading at a price to book multiple of 7.9x as compared to the industry median (Financials) of 1.3x on TTM basis. In addition, the stock of PTM is trading at a price to cash flow multiple of 15.6x in comparison to the industry median (Investment Banking & Investment Services) of 12.6x on TTM basis. Since the expected performance of the company is sensitive to the broader macro-economic environment as well as to the health of global economy, it would be beneficial for investors to track the performance of the stock in the present scenario. Also, the company is expected to release its half-year earnings on February 19, 2020 on which the investors should keep an eye. Thus, considering the higher valuations compared to the industry, challenging macro environment, upcoming results, etc., we have a watch stance on the stock at the current market price of A$4.250 per share, down 1.163% on 21^st November 2019.
 

Perpetual Limited

A Decline in Earnings:Perpetual Limited (ASX: PPT) is involved in portfolio management; financial planning; trustee, responsible entity and compliance services; executor services; investment administration; and custody services with a market capitalisation of A$1.85 Bn as on 21^st November 2019. The company and its related bodies corporate have made a change to their substantial holdings in Enero Group Limited on 19^th November 2019, and the current voting power stands at 13.67% as compared to the previous voting power of 12.14%. In FY19, the company reported a decline of 4% and 17% in revenue and net profit after tax, respectively, in a challenging market condition.
In another update, it was mentioned that Perpetual Investments’FUM as at 30^th September 2019, which stood at $26.1 billion, reflecting a decline of $1.1 billion on the previous quarter.This decline is comprised of $1.8 billion of net outflows primarily from Australian Equities, which were offset by market appreciation of $0.7 billion.


FUM and Flows by Asset Class (Source: Company Reports)

Future Prospects:As per the 2019 Annual Report, the long-term outlook for the Group is reinforced by the growing need of Australians for investments, advice and income in retirement. The company’s diversified business model places it well to seek opportunities, organic and inorganic, throughout all three-business lines.

Stock Recommendation:With respect to strategic priorities, it has implemented a new operating model, which brings the company closer to the client, provides improved operational excellence, enables for more innovation, and delivers streamlined governance and decision-making processes. The stock of PPT is trading at a P/E multiple of 15.78x against the industry median (Financials) of 14.7x on TTM basis. The stock is available at a price to book multiple of 2.8x in comparison to the industry median (Financials) of 1.3x on TTM basis. On the stock’s performance front, it delivered returns of 12.73% in the time period of one month and 26.57% on YTD basis.  As per the ASX, the stock of PPT is trading above the average of its 52-week low-high. Hence, in light of stretched valuations and current trading levels, we give an “Expensive” recommendation on the stock at the current market price of A$38.790 per share, down 1.996% on 21^st November 2019.
 
Comparative Price Chart (Source: Thomson Reuters)

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