Australian Ethical Investment Limited

AEF Details

Financial Overview of Q3FY22 (Ended 31 March 2022): Australian Ethical Investment Limited (ASX: AEF) offers investment management products to investors and holds over ~$6 billion in FUM (funds under management) via superannuation and managed funds.

• On a year-to-date (YTD22) basis, FUM moved from ~6.07 billion in June 2021 to ~$6.83 billion in March 2022 (up ~13% since 30 June 2021).
• AEF added ~5,191 new customers in Q3FY22, bringing the total customer count to ~79,909 and depicting a ~4% increase from 31 December 2021.

Comparative FUM Performance; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of market volatility, liquidity risk, interest rate, and regulatory changes.

Outlook:

• The company remains committed to implementing its high growth strategy declared at the time of FY21 results and is confident about the medium-term growth avenues.
• It plans to launch multiple initiatives in 2HFY22, deploy resources in key growth areas and explore M&A opportunities. AEF is investing in digitising customer experiences and transforming back-office technologies as part of its growth plans.

Technical Note: On the daily chart, AEF stock prices are sustaining above the falling trend line support level and hovering around the trendline. Moreover, the momentum oscillator RSI (14-period) is trading near an oversold zone at (~32.58 level) and formed the positive divergence which might indicate the possibility of a rebound in the prices. However, the prices are trading below the trend-following indicators 21-period SMA and 50-period SMA, which may act as crucial resistance zone. An important support level for the stock, is placed at AUD 4.90 while the key resistance level is placed at AUD 6.50. 

Stock Recommendation: The stock of AEF gave a negative return of ~38.16% in the past three months and a negative return of ~62.80% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $5.340 - $15.080. Considering the current trading levels, positive net flows for Managed Funds & Superannuation product categories in Q3FY22, addition of new customers, continued investment in the high growth strategy, plans to introduce new initiatives, technical levels mentioned above, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $5.460, down by ~4.378%, as of 6 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

AEF Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decision 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 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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