VGI Partners Limited

VGI Details

Update on Proposed Merger: VGI Partners Limited (ASX: VGI) is a global equity manager which manages capital for high-net-worth individuals, family offices and two Listed Investment Companies. With respect to the proposed merger of VGI Partners Limited and Regal Funds Management Pty Limited, VGI confirmed due diligence and the negotiation of the terms of a binding merger implementation agreement, which will be subject to the final board approvals of each of VGI and Regal.

• As per the agreement, VGI would acquire 100% of Regal in consideration for the issue of new ordinary shares in VGI to existing Regal shareholders.
• The anticipated shareholding of the merged entity at the completion of the proposed merger will be 60% current Regal shareholders and 40% current VGI shareholders.

FY21 Operational and Financial Summary: As on 31 December 2021, VGI’s funds under management (FUM) stood at $2.5 billion against $2.8 billion as on 30 September 2021; the fall in FUM was mainly due to the combination of redemptions of $0.2 billion and underlying fund performance. During FY21, the company experienced decent financial results, evident by rising topline and bottom line.

Financial Summary (Source: Analysis by kalkine Group)

Key Risks: VGI’s financial health could be impacted by unfavourable movement in foreign currency. The company’s funds’ performance could be impacted by the volatility in the equity market

Outlook: VGI’s future performance is directly linked to the performance of the existing VGI Partners Funds. The company is optimistic about generating superior risk-adjusted returns over the long term and through investment cycles.

Stock Recommendation: The stock of VGI is trading below near to its 52-week low level of $4.010, offering a decent opportunity for accumulation. The stock has been corrected by ~16.29% and ~6.37% in the past one and three months, respectively. On a TTM basis, VGI has an EV/sales multiple of 3.4x against the industry average (Financials) of 7.9x. Thus, it can be said that the stock is undervalued at the current trading level. Considering the valuation on a TTM basis, decent performance in FY21, decent liquidity position, increasing NPAT, optimistic outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $4.110, down by ~1.675% as on 04 March 2021.

VGI Daily Technical Chart, Data Source: REFINITIV

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