Pendal Group Limited

PDL Details

FY20 Financial Update: Pendal Group Limited (ASX: PDL) provides investment management services. The market capitalisation of the company as on 14 January 2021, stood at ~$2.18 billion. The company delivered a resilient performance in FY20, reporting total revenues of $474.75 million. There was a decrease of 10% on cash NPAT to $146.8 million, compared to pcp. The reduction can be attributed to the impact of COVID-19, ongoing trade wars and geopolitical risk. It had a cash balance of $207.48 million as on 30 September 2020.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company has assessed its engagement with clients and will continue to focus and invest in its digital capabilities. It sees scope in expanding its distribution reach, enhance client engagement and extend its business through the digital marketing platform.  

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

P/CF Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company witnessed decent investment performance in key funds and an improvement in unrealised performance fees during the second half of FY20.  PDL gave a positive return of 1.67% in the past three months and a negative return of 0.14% in the past one month. The stock of PDL is trading above its average 52-week trading range of $3.00-$9.330. On a technical front, the stock of PDL has a support level of $5.983 and a resistance level of $7.31. We have valued the stock using a P/CF multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers such as Janus Henderson Group PLC (ASX: JHG), Navigator Global Investments Limited, (ASX: NGI) Perpetual Limited (ASX: PPT), to name a few. Considering the current trading levels, resilient performance in FY20 despite the difficult business environment, improvement in key funds’ performance and comfortable cash position, we recommend a ‘Hold’ rating on the stock at the current market price of $6.68, down by 0.743% as on January 14, 2021.

PDL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Prospa Group Limited

PGL Details

Q1FY21 Trading Update: Prospa Group Limited (ASX: PGL) provides finance to small businesses. The market capitalisation of the company as on 14 January 2021, stood at ~$132.71 million. The company reported total originations of $80 million in Q1FY21, an increase of 265% on Q4FY20. This reflects an improvement in small business’ sentiments and demand during the quarter. PGL maintained an annual portfolio yield of 31.5% during the quarter, despite the volatility in the business environment owing to the COVID-19 pandemic. It ended the quarter with a stable balance sheet and liquidity position of  $422.1 million in available third-party facilities and $111.1 million in cash equivalents.

Q1FY21 Key Metrics Performance (Source: Company Reports)

Outlook: The company remains positive on its business performance in the near term, given the support the small businesses have received from the Government. This makes PGL believe that the small businesses will hence start planning, investing, and hiring for the future, thus requiring additional capital to finance its operations.  

Stock Recommendation:  The company originated $57 million of loans and lines of credit in Q1FY21 under the GGS, compared to $10.8 million of loans that originated under the GGS in Q4FY20. PGL gave a positive return of 15.97% in the past three months and a negative return of 7.7% in the past one month. The stock of PGL is trading below its average 52-week trading range of $0.400-$2.170. On a technical front, the stock of PGL has a support level of $0.681 and a resistance level of $1.016. On a TTM basis, the stock of PGL is trading at an EV/Sales multiple of 0.8x, lower than the industry median (Financials) of 4.5x. Considering the current trading levels and valuation, decent rise in loan originations, liquidity position and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.835, up by 1.829% as on January 14, 2021.

PGL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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