Magellan Financial Group Limited

Improving Margins: Magellan Financial Group Limited (ASX: MFG) is an Australian financial company engaged in generating returns for its clients by investing in various global equities and global listed infrastructure companies. Since its inception, MFG has been able to develop a track record for creating and safeguarding wealth for its clients by investing in high-quality global stocks. It has a team of 30 investment professionals, who are highly qualified and experienced, managing more than A$72.1 billion (as on 30 November 2018) in global equity and infrastructure strategies around the world.


Key Dates for 2019 (Source: Company Reports)

During November 2018, the total FUM was reported at $72.111 billion which was 1.19% or $870 million less than the previous month’s FUM of $72.981 billion. However, the company experienced a net inflow of $522 million, which included net retail inflow of $72 million and net institutional inflows of $450 million.

Financial Highlights for FY18:
 

• Total revenue went up by 34% and was reported at $452.598 million. The increase was on account of a 27% increase in total management fees because of a 29% increase in FUM as well as the acquisition of Airlie for $6.3 billion in March 2018.
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• Total FUM for FY18 was reported at $62.509 billion which was 37.38% more than the FY17. The increase in FUM was driven by investment performance of approx. $8.5 billion less cash distribution of approx. $0.3 billion, net inflows of $4.4 billion and the acquisition of Airlie.
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• The company reported higher total expenses this year of $181.988 million by 121.56% primarily on account of offer cost relating to the capital raising of Megallan Global Trust of $23.8 million as well as of offer cost of issuing loyalty units of $56.965 million.
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• Net profit after tax and diluted EPS were up by 8% and 6.92%, respectively and were reported at $211.791 million and $1.22 respectively.
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• Net tangible asset per share increased to $2.92 in FY18 which was earlier reported at $2.60 in FY17 (an increase of 12.31%).
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• The company paid a dividend of $1.345 per share in FY18 which was $0.856 per share in FY17.
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Fundamental analysis:
 

• The company reported EBITDA margin of 78% for FY18 which is almost in line with the past 5-year trend, but it is slightly higher than the industry median of 62.1%.
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• The operating margin has declined over the past 5-years from 74.7% in FY14 to 59.7% in FY18. The industry median was calculated at 60.6% which is slightly higher than the company’s operating margin.
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• Similarly, the net margin has declined over the past 5-years from 55.7% in FY14 to 47% in FY18 but was higher than the industry median of 30.4%.
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• The company is able to generate more revenue out of its assets than its peers as it reported better asset turnover ratio of 0.77x which was better than the industry’s ratio of 0.07x.
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• MFG reported a higher ROE of 39.7% than the industry ROE of 10%.
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• MFG has around 176.21 million shares outstanding with the market cap of $4.21 billion (as on December 28, 2018) and a beta of 1.04x (5-year monthly basis).
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Meanwhile, the share price has fallen 14.24% in the past three months as at December 27, 2018 and trading close to lower level. Considering the improving financials over the period and better performance than its peers, we maintain our “Buy” recommendation on the stock at the current market price of $23.790.
 
 

Platinum Asset Management Limited

PTM’s Strong Financials but declining stock price creating new support: Platinum Asset Management Limited (ASX: PTM) is an Australian financial company engaged in investing in global equities. Recently, the Group reported the FUM or funds under management figure as of November 30, 2018. As per the release issued, at the end of November 30, 2018, the company had total funds under management amounting to $24.189 billion which dipped by ~2% as compared to $24.680 billion in October month.

Fundamental Analysis:
 

• FUM for FY18 was reported at $25.7 billion with an increase of 13% from FY17 on account of strong investment performance of the fund which added approx. $3.5 billion to FUM.
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• The company reported fee revenue of $328.7 million in FY18 which was 5.18% more than the previous year on account of increase in inflows and strong investment performance.
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• The company reported a healthy profit margin of 76% in FY18 and paid a dividend of 32 cents in FY18. The annual dividend yield was reported at 6.64%.
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• PTM reported higher staff cost in FY18 due to which profit after tax for FY18 declined as compared to FY17.
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• Diluted EPS was reported at 32.36 cents in FY18 with an increase of ~2% as compared to 31.74 cents in FY17.
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• The company reported higher EBITDA margin, operating margin, and net margin of 75.5%, 75.3%, and 55.7% respectively as compared to the industry median of 62.1%, 60.6%, and 30.4% respectively.
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• PTM reported a better asset turnover ratio and a better ROE of 0.86x and 56.5% in FY18 as compared to the industry median of 0.07x and 10%, respectively.
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Financial Results (Source: Company Reports)

Meanwhile, the stock has generated negative YTD return of 36.33% and trading around its 52-week low. We believe that all positive developments have been discounted at the current juncture. The scrip has been in the declining trend from the past 1-year and is creating a new support level on a regular basis. Besides this, the stock is positioned near to the lower level of the Bollinger band and is in the average position of the RSI. We, therefore, suggest the market players to avoid the stock at the current market price of $4.880 (up 1.245% on December 28, 2018).
 

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