Magellan Financial Group Limited

MFG Details

Increase in Funds Under Management (FUM): Magellan Financial Group Limited (ASX: MFG) is a fund management company, principally engaged with the objective of offering international investment funds to high net worth and retail investors in Australia and New Zealand, and institutional investors globally.  The company has reported an increase in its total FUM to $106,054mn as on 31 March 2021 as compared with $100,608mn as reported on 26 February 2021. The company has reported an increase in its retail funds to $29,033mn as on 31 March 2021 as compared with $27,648mn as on 26 February 2021. Likewise, Institutional funds were increased from 72,960mn as on 26 February 2021 to $77,021mn as on 31 March 2021.

Key Highlights (Source: Company Reports)

1HFY21 Financial Highlights: MFG has reported an increase in average funds under management by 9% to $100.9bn. The company has reported an increase in Management and services fees revenue by 8% to $311.4mn. The company has reported a net profit of $202.3mn in 1HFY21 as compared with $195.7mn in 1HFY20.

Dividend Declared: The company has declared a dividend of $0.9710 for its shareholders on 11 February 2021. The ex-date for dividend was on 16 February 2021 and the payment date for dividend was on 25 February 2021.

Key Risks: The company is engaged in fund management activities. Therefore, economic slowdown will lead to decline in funds and may result in business loss for the company. The company is present in highly competitive industry, better fund performance from the peers may result in business loss for the company.

Outlook: As per the company report, the company expects its FUM expenses to be in a lower range of $110-$115mn in FY21. The company’s expectation on lower expenses will depend on the market related events like foreign exchange rates and unitholder activity.

Valuation Methodology: Price/Earnings based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, MFG has increased by ~11.85% and decreased by ~5.83% in the last three months. The current market capitalisation of MFG stands at ~$8.81bn as of 12 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$42.010-~$66.00. On the technical analysis front, the stock has a support level of ~$46.68 and a resistance of ~$49.05. We have valued the stock using a Price/Earnings multiple-based illustrative relative valuation method and arrived at a target price of high single-digit upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer median considering, an increase in its funds under management, an increase in management and service fees and decline in expenses for fund management business. For the purpose we have taken peers Moelis Australia Ltd (ASX: MOE), Macquarie Group Ltd (ASX: MQG), to name a few. Considering a positive outlook, increase in funds under management, dividend declaration, valuation, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $48.40, up by 0.875% as on 12 April 2021.

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

ASX Limited

ASX Details

Raised Higher Capital Via Varied Financial Activities: ASX Limited (ASX: ASX) is engaged in providing securities and derivative exchange, ancillary services; central counterparty clearing services, depository, settlement, and many other financial and other services. The company's segments include prices and research, market products, trading services, listing and issuer services and education services. The company has reported a list of financial activities, which took place in March 2021 to raise capital. The company has registered an increase in its total capital raised to $7,432mn in the month of March 2021 as compared with $4,158mn in March 2020 month. The company has registered a modest decline of 1% from total listed entities to $2190 in March 2021. The company has seen a growth of 33% in initial capital raised to $1409mn in March 2021 and 95% increase in capital raised from secondary markets to $6,023mn in March 2021 as compared with $3,095mn in March 2020.

Capital Raised (Source: Company Reports) 

1HFY21 Financial Highlights: ASX has reported an increase in its operating revenue to $470.5mn in 1HFY21 as compared with $454.9mn in 1HFY20. The company has reported a decline in its net profits to $241.8mn in 1HFY21 as compared with $250.4mn in 1HFY20, due to lower interest rate environment. The company will be paying lower dividends in alignment with NPAT, which came in at 112.4 cents per in 1HFY21, down 3.4% year over year.

Key Risks: The company provides financial services such as cash market exchange, derivatives exchange, and depository services. Thus, any non- compliance of regulatory guidelines may result in financial losses for the company. The company is exposed to pandemic situation, which may lead to lower volumes on the exchange, leading to decline in business.

Outlook: The company is continuously investing in its multi-year technology program that includes CHESS replacement project. The investment in such technology will lead to lowering an average age of its equity technology stack from 11 years in 2019 to four years by 2023.

Valuation Methodology: Price/Earnings based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, ASX has increased by ~5.71% and by ~0.9115% in the last three months. The current market capitalisation of ASX stands at ~$14.08bn as of 12 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$65.60 -~$91.32. On the technical analysis front, the stock has a support level of ~$69.91 and a resistance of ~$73.59. We have valued the stock using a Price/Earnings multiple-based illustrative relative valuation method and arrived at a target price with a limited upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer median considering, an increase in capital raising in March 2021, increases in operating revenues and higher EBIT in 1HFY21. For the purpose we have taken peers Netwealth Group Ltd (ASX: NWL), Pinnacle Investment Management Group Ltd (ASX: PNI), to name a few. Considering the above-mentioned factors, volatile and uncertain market conditions due to pandemic situation, stringent regulations, and valuation, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the current market price of $73.07, up by 0.398% as on 12 April 2021.

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

Note: 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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.