Magellan Financial Group Limited

MFG Details

Ceasing to be a Substantial Holder: Magellan Financial Group Limited (ASX: MFG) is involved in funds management with the objective of offering international investment funds to high net worth and retail investors. Recently, the company has ceased to be a substantial holder in Mineral Resources Limited, which became effective from 10 January 2022.

FUM Update: As on 31 December 2021, the company reported total funds under management of $95,491 million as compared to $113,304 million and $101,370 million as on 30 September 2021 and 31 December 2020, respectively.

• Excluding the termination of the St. James’s Place mandate, the company witnessed net outflows of $1,552 million for the December 2021 quarter. This included net retail outflows of $1,093 million and net institutional outflows of $459 million.
• As a result of the termination of St. James’s Place, there was a reduction of $23 billion in institutional funds under management.
• For the six-month period ended 31 December 2021 (1HFY22), base management fees were around 62 basis points (per annum) of the average of month-end funds under management. Average Funds under management for 1HFY22 stood at $112.7 billion as compared to $100.1 billion for 1HFY21.
• MFG is likely to pay distributions (net of reinvestment) of ~$416 million in January 2021. In addition, the company is entitled for the performance fees of ~$11 million for 1HFY22.

FUM Trend (Source: Analysis by Kalkine Group)

Termination of SJP Mandate: As announced on 20 December 2021, St James’s Place (SJP) has terminated its mandate with Magellan Asset Management Limited (Fully Owned Subsidiary of MFG).  SJP mandate contributes ~12% of the current annual revenues of the group. As a result of the termination, MFG’s revenue for FY22 could be impacted by ~6%, and 1HFY22 results could witness an immaterial impact.

Key Risks: The company’s operational and financial performance could be impacted by extreme volatility in the securities market. In addition, MFG is exposed to a more complex regulatory environment; any failure in the compliances could lead the business to fines, penalties etc.

Outlook: The company expects to report funds management business expenses for FY22 in the range of $125-$130 million. In addition, it has scheduled to release 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 below its 52-week low-high average of $19.190 - $56.180, respectively. The stock has been corrected by ~32.82% in the past one month. The stock has been valued using 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 a slight discount to its peers’ average P/BV multiple, considering the market volatility and the risk associated with the termination of SJP mandate, etc. For the purpose of valuation, peers such as Macquarie Group Ltd (ASX: MQG), Perpetual Ltd (ASX: PPT), and Platinum Asset Management Ltd (ASX: PTM) have been considered. Considering the expected upside in valuation, rising FUM, growing bottom line, optimistic long-term outlook, current trading levels and risks associated with the termination of SJP mandate, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $20.060, as on 13 January 2022, 1:20 PM (GMT+10), Sydney, Eastern Australia.

MFG Daily Technical Chart, Data Source: REFINITIV

Wisr Limited

WZR Details

Appointment of Director: Wisr Limited (ASX: WZR) provides personal loans and retail investment products. As announced on 17 December 2021, the company has appointed Cathryn Lyall to the role of Non-Executive Director, which became effective from 01 January 2022.

Q1FY22 Financial and Operational Highlights:

• During the quarter, the company recorded operating revenue of $12.1 million, reflecting a rise of 195% over Q1FY21 and a 25% increase on Q4FY21.
• Q1FY22 proved as 21^st consecutive quarters of loan growth. The company posted a record of $132 million in origination in the quarter and a rise of 113% increase over Q1FY21 ($62 million).
• The company seems to be well-capitalised with unrestricted cash of $30.7 million and $24.4 million in liquid loan assets as on 30 September 2021.

Operating Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company operates in a very competitive environment; hence rising market share of peers could impact its business growth. In addition, the company’s financial performance could be impacted by failure by counterparties in fulfilling their obligations.

Outlook: The company believes that its future growth would be supported by the $225 million Wisr Secured Vehicle Warehouse. In addition, WZR anticipates increased demand in the personal finance market as lock-down restrictions start to lift and consumer demand naturally rises in the personal loan categories.

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 WZR is trading near to its 52-week low level of $0.175, offering a decent opportunity for accumulation. The stock has been corrected by ~28.07% in the past three 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 a slight premium to its peers’ average P/BV multiple, considering the rising revenue and record loan originations, etc. For the purpose of valuation, peers such as Credit Corp Group Ltd (ASX: CCP), Moneyme Ltd (ASX: MME Plenti Group Ltd (ASX: PLT), and others have been considered. Considering the expected upside in valuation, rising operating revenue, growing loan origination, decent long-term view, current trading levels and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $0.200 as on 13 January 2022.

WZR Daily Technical Chart, Data Source: REFINITIV 

Credit Corp Group Limited

CCP Details

Key Updates: Credit Corp Group Limited (ASX: CCP) is engaged in debt purchasing and collection as well as consumer lending.

• As announced on 21 December 2021, the company has appointed Mr. James Millar AM as a Non-Executive Director.
• On 20 December 2021, the company wrapped up the acquisition of the assets of the Radio Rentals appliance leasing business from Thorn Group Limited for a total consideration of approximately $60 million.

Decent Start to FY22: The company commenced a decent operational start to FY22 with decent collection despite limited investment. Productivity for Q1FY22 rose by 8% to $323 per hour over Q1FY21.

FY21 Financial Summary: For the year ended 30 June 2021, CCP posted a rise of 11% in net profit after tax (NPAT) to $88.1 million over pcp. The US segment posted strong results, evident by double NPAT to $17.7 million. CCP posted near-record purchased debt ledger (PDL) investment outlay of $293 million in FY21.

NPAT Trend (Source: Analysis by Kalkine Group)

Key Risks:  The company’s performance could be impacted by the change in technology, which could impact the operational performance of the business. In addition, the company is exposed to regulatory risk; any failure in the compliances could lead the business to fines, penalties, etc.

Outlook: For FY22, the company expects to report NPAT in the range of $92 - $97 million and net lending volumes of between $45 - $55 million.

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 CCP is trading above its 52-week low-high level of $25.990 - $34.480, respectively. The stock has provided returns of ~12.37% and ~19.50% in the past three and six months, respectively. The stock has a support and resistance level of $31.60 and $35.90, respectively. The stock has been valued using a P/BV multiple-based illustrative relative valuation and arrived at a target price with a correction of high-single-digit upside (in % terms). The company can trade at a slight discount to its peers’ average P/BV multiple, considering the COVID-19 uncertainties and considerable investment outlay, etc. For the purpose of valuation, peers such as Money3 Corp Ltd (ASX: MNY), Eclipx Group Ltd (ASX: ECX), Plenti Group Ltd (ASX: PLT), and others have been considered. Considering the indicative downside in the valuation, current trading levels, solid rally in the past few months, and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $34.150, as on 13 January 2022, 12:15 PM (GMT+10), Sydney, Eastern Australia.

CCP 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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 the 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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