Platinum Asset Management Limited

PTM Details

Appointment of New Director: Platinum Asset Management Limited (ASX: PTM) is involved in financial planning, asset management, and financial advisory services. On 17 December 2021, Philip Moffitt, joined as an Independent Non-Executive Director in the company.

Updated FUM: The company held ~$22.05 million funds under management (FUM) as of 30 November 2021 versus ~21.57 million as of 31 October 2021. PTM witnessed ~$183 million of net outflows in November 2021.

Key Dates:

• The company has indicated to set the record date as 2 March 2022 and the payment date as 18 March 2022 for the 1HFY22 dividend.
• PTM plans to declare its interim results (1HFY22) on 23 February 2022.

Chair Address to Investors:

• PTM believes the stock was significantly undervalued previously. It is now trading at 13X consensus 2022 earnings in sync with its listed peers.
• PTM distributes fully franked dividends and generated an average dividend yield of ~5.8% over the last 5 years.
• PTM has improved its engagement with advisers and clients via webinars, participation in industry events, and virtual meetings. The digital strategy has been improved to incorporate the use of social media campaigns.
• In Australia and New Zealand, PTM undertook product initiatives and enhancements. It launched Platinum Investment Bond in alliance with Australian Unity and introduced a new fixed cash distribution option for the Platinum Trust Funds.
• The company witnessed ~9% decline in the aggregate FUM for the four months ended as of 31 October 2021 due to lower investment returns and net outflows.
• The company has invested significantly and taken early positions in Chinese and semi-conductor stocks.
• The PIF (Platinum International Fund), the largest fund of PTM, gave a net return of ~26.1% versus ~27.7% by MSCI AC World Net Index for the twelve months ending as of 30 June 2021.

Key Financials from FY19-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces travel restrictions due to COVID-19, equity market volatility, capital deterioration risk on its business.

Outlook:

• The company has been factoring in ESG (environmental, social, and governance) considerations to its investment approach. PTM has hired a dedicated ESG investment specialist to collaborate with its investment team to refine the ESG investment approach.
• PTM chooses to follow a cautious investment approach by avoiding inflation-sensitive growth stocks and focusing on the capital preservation of clients.
• PTM is currently planning to roll out a new thematic fund in Q1FY22.

Valuation Methodology: Price to Book Value 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 PTM gave a negative return of ~28.72% in the past three months and a negative return of ~47.77% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $2.570 - $5.140. The stock has been valued using the P/BV multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ median P/BV multiple, considering the underperformance of the PIF vs MSCI indices in FY21, reduced investment management fees, net outflows, and risk of volatility in the equity markets. For this purpose of valuation, few peers like Magellan Financial Group Limited (ASX: MFG), Pinnacle Investment Management Group Limited (ASX: PNI), MA Financial Group Limited (ASX: MAF) have been considered. Considering the current trading levels, increase in total revenue, profit before tax in FY21, FUM growth, indicative valuation, we give a ‘Buy’ rating on the stock at the current market price of $2.580, as of 20 December 2021, 1:17 PM (GMT+10), Sydney, Eastern Australia.

PTM Daily Technical Chart, Data Source: REFINITIV  

Latitude Group Holdings Limited

LFS Details

Distribution on Capital Notes: Latitude Group Holdings Limited (ASX: LFS) offers Lending (L Money) and instalments (L Pay) products via its business-to-business-to-consumer (B2B2C) model to its customers in Australia and New Zealand. The company announced a distribution of $1.106 per share for security code LFSPA, CAP NOTE 3-BBSW for the quarter ending on 26 January 2022. It has set 19/1/2022 as the record date and 27/1/2022 as the payment date.

Key Takeaways from the Macquarie Conference Presentation 

• The daily average volume of the Group increased by ~9% on a month-to-date (MTD) basis as of 10 November 2021 vs October 2021 due to growth in the interest-free sales finance product.
• LFS expects the opening of the Victorian and NSW economies and overseas travel after the recently lifted ban in October 2021 would help in recovering the volume of lending products and receivables.
• The company witnessed an increase in receivables in November 2021 on an MTD basis with predominant upside in credit cards and sales finance business in Australia.
• The company foresees a large ~$11 billion addressable opportunities in the variable personal consumer loans market. It currently has a ~26% market share in the fixed-rate personal loans segment in Australia.

Key Metrics from 1HFY20-1HFY21; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of accrual of synergies, launching new products in new territories, and COVID-19 lockdown disruptions in New Zealand & Australia.

Outlook:

• LFS expects to declare ~7.85 cents per share (cps) of fully franked dividend in 2HFY21.
• LFS is undergoing technical integration with Symple Loans and is on track to achieve the program milestones. It expects annualised synergies of ~$26 million in FY22 and more in FY23 and FY24.
• LFS continues to invest in the simplification agenda to streamline the technology cost base. it plans to expand the commercial launch of the new LatitudePay plus (a big-ticket BNPL product) and investment in Asia.
• With the acquisition of Symple Loans, LFS expects multiple growth opportunities to grow its core instalments and lending businesses in 2HFY21.

Valuation Methodology: EV/EBITDA 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 LFS gave a negative return of ~13.30% in the past three months and a negative return of ~16.37% in the past six months. The stock is currently trading near its 52-weeks’ average price level band of $1.880 - $2.990. The stock has been valued using the Enterprise Value to EBITDA multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average EV/EBITDA median multiple, considering the decline in total operating income, significant investment (in technology, big-ticket BNPL product) in 1HFY21, risk of COVID-19 lockdowns, accrual of synergies from the acquisition. For this purpose of valuation, a few peers like Humm Group Limited (ASX: HUM), Credit Corp Group Limited (ASX: CCP), Money3 Corp Limited (ASX: MNY) have been considered. Considering the current trading levels, increase in cash NPAT, reduced opex, recovery in lending volumes, the launch of LatitudePay plus product, valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $1.890, down by ~1.048% as of 20 December 2021.

LFS Daily Technical Chart, Data Source: REFINITIV  

VGI Partners Limited

VGI Details

Highlights from the Recent Chair Address: VGI Partners Limited (ASX: VGI) offers investment management services to ASX listed VGI Partners Asian Investments Limited (VG8), VGI Partners Global Investments Limited (VG1), and VGI Partners Offshore Fund. VGI invests in multiple small businesses and for long-term. Recently, VG8 and VG1 held their annual general meetings (AGMs) on 16 November 2021 and Chairman, Mr. Robert Luciano, highlighted the following aspects of its portfolio investments:

• VG1 investments posted a net portfolio return of ~25.6% after fees for the twelve months ended on 30 June 2021.
• VG8’s net portfolio returns after fees stood at ~15% fees for the twelve months ended 30 June 2021.
• VGI’s Asian portfolio constitutes diverse investments in ten (10) companies including Mercari, Panasonic, Alibaba Group, etc.
• The Board of VGI is still reviewing the discount to the NTA situation and initiated a series of measures to reduce it. Though the discount was reduced to a single digit in FY21, however, it again slipped in the September 2021 quarter due to a dip in the business performance.
• VGI invested significantly in technology and updated its CRM (Customer Relationship Management) software, expanded staff to enhance marketing activities, adviser, and investor engagement.

Increase in the value of NTA; (Analysis by Kalkine Group)

Key Risks: The company faces the uncertainty of financial markets, macro-upheavals such a COVID-19, regulatory policy changes. It faces a host of financial risks relating to credit, interest rate, and portfolio return.  

Outlook:

• VGI aims to deliver a fully franked dividend yield of 4% per year.
• VGI is engaging with external advisers to review the discount to NTA situation and resolves to address the problem within Q1FY22 based on further recommendations by the Board.
• The company plans to halt the buy-back share program for VG1 as the review process is still underway. It plans to provide quarterly portfolio update via webcasts to the senior investment officials of VG8.

Stock Recommendation: The stock of VGI gave a negative return of ~31.58% in the past three months and a negative return of ~35.19% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $4.060 - $8.660. On a TTM basis, the stock of VGI is trading at an EV-to-Sales value multiple of 2.8x lower than the industry (Investment Banking & Investment Services) median of 4.1x, thus seems undervalued. Considering the current trading levels, lower debt-to-equity levels, valuation on a TTM basis, increase in the funds under management (FUM), NPAT, and net operating cash flows in FY21, investments in technological upgrades, and engagement team expansion, valuation, plans to correct discount to NTA and deliver dividend yield, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $4.180, down by ~3.465% as of 20 December 2021.

VGI 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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