Magellan Financial Group Limited (ASX: MFG)

MFG Details

Increase in Average Funds under Management - Magellan is an expert that invests globallyand invests in the world’s best companies to grow and safeguard the wealth of its clients. It has developed a track record for creating and safeguarding wealth for its investors. Magellan recently developed low-carbon strategies and pioneered a paperless way to invest in active global equities on the ASX. The Group experienced net outflows of $47 million, which included net retail outflows of $57 million and net institutional inflows of $10 million as on 31 May 2018. While in April, Magellan experienced net outflows of $268 million, which included net retail outflows of $64 million and net institutional outflows of $204 million. There was a growth of 1.74 per cent in total funds under Management from April 2018 to May 2018. Australian stocks have been proving to be a good investment over the past two decades; and MFGoperates with the objective of delivering risk-adjusted returns through the stocks over the medium to long-term with minimising the risk of permanent capital loss.


Financial Performance Summary (Source: Company Reports)
 
During the first half of the year, the group has entered into an agreement to acquire Frontier Partners and Airlie Funds Management. The group also decided to cease the development of the international (non-US) low carbon strategy. Since the start of the year, the stock declined by 8.55 per cent and jumped up by 2.60 per cent in last five days. We give a “Buy” recommendation at the current market price of $23.76 as the Group is focussing on its institutional distributions and on its retail fund’s management business in Australia.


MFG Daily Chart (Source: Thomson Reuters)
 

QBE Insurance Group Limited (ASX: QBE)

QBE Details

Striving for global best practice in underwriting, pricing and claims - QBE Insurance Group Limited, a company with a strong market position and engaged in underwriting general insurance and reinsurance risks, is actively implementing its Brilliant Basic programme and is simplifying its operational model. It was noted that operational efficiency was impacted in FY17 with many catastrophes impacting the performance, but QBE is now targeting to achieve the combined operating ratio in the range of 95.0 per cent - 97.5 per cent in 2018 and investment return in the range of 2.5 per cent - 3.0 per cent given the various initiatives undertaken by the group. The focus is now on continued transformation and growth. QBE’s new initiative of Premiums4Good that is a unique global initiative, enables itscustomer to use a portion of their premium so that they can invest in securities with an additional social or environmental objective, such as social impact bonds, green bonds and investments in infrastructure projects with environmental benefits.In the first quarter of 2018, the group’s rate increased in line with forecasts, in terms of pricing environment.


Cell Review Process (Source: Company Reports)

Premium rate strength of over 4 per cent was noted for the first quarter, again led by Australia & New Zealand Operations, and positive rate movements in North America and Europe, while the Asia Pacific is under a comprehensive plan of action. The stock was down by 6.83 per cent in one month and has been witnessing a challenging environment since 2017. The dynamics now seem to be changing given the initiatives at fundamental level that helped QBE move up by 3.20 per cent in last five days. We give a “Buy” recommendation at the current market price of $9.64.
 

QBE Daily Chart (Source: Thomson Reuters)
 

Pendal Group Limited (ASX: PDL)

 PDL Details

Increase in Operating Expenses- Pendal is an independent, global investment management business that is focused on delivering superior investment returns for its clients through active management. Its business is designed to attract and retain superior investment talent by offering a transparent remuneration model with the ability to manage capacity. It offers a broad range of investment strategies across a global marketplace. The group posted a growth of 45 per cent of Statutory NPAT that amounted to $114.8 million in 1HFY18 as compared to the previous corresponding period. Further, the group has recorded a gross margin of 99.1 per cent as at March 2018, which is above industry median. ROE and ROIC stood at 14 per cent and 13.6 per cent, respectively in 1HFY18, representing good return within the industry and expecting same performance in years to come.  Pendal Group, a substantial holder of Metcash Limited enhanced its substantial holding from 12.80 per cent to 13.95 per cent since 6 June 2018. The Group reported an increase of 3.3 percent as on 31 March 2018 from 30 September 2017 in FUM. The Group was impacted by outflows ($2.1 billion) related to Westpac which were derived from Westpac MySuper redemptions and the legacy book.
 
 

Operating Expenses Trend (Source: Company Reports)

As on 31 March 2018, total expenses were $157.7 million, 11.0 per cent higher than the prior half year. The stock price thus had fallen in the last one year and was down by 14.78 per cent and further down by 1.07 per cent on 22 June 2018. Despite the dip, the stock looks “Expensive” at the current market price of $10.09.
 

PDL Daily Chart (Source: Thomson Reuters)
 

AMP Limited (ASX: AMP)

AMP Details

Slumped owing to allegations and investigations by Regulators -AMP is a wealth management Company that offers solutions and services across financial advice, investment management, banking, superannuation, self-managed superannuation funds (SMSFs), life insurance, retirement income and investing.Recently, AMP was replaced by Amcor Limited (ASX: AMC) in S&P/ASX 20 Index. The Royal Commission inquiry revealed that the group misled the corporate regulator for 10 years, provoking departure of best administration from the firm. Based on above allegation, Moody revised its view on AMP Life's business profile and profitability which will lead to further pressure on earning and profitability of the business. Despite experiencing strong gains over the second quarter of the calendar year 2018, the stock is hovering around a 52-week low of $3.56. ASIC is continuously focusing on the Group’s practice of charging fees-for-no-service to clients which has been a bad news for its investors.


Growth of AMP Australian Wealth Management (Source: Company Reports)
 
The stock price has been declining for the last six months (down over 31%).Given the shortcomings and damage to the brand which might take some time to recover, the stock looks “Expensive” at the current market price of $3.63.
 

AMP Daily Chart (Source: Thomson Reuters)

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