Platinum Asset (Investment) Management Ltd.

PTM Details

Platinum Asset (Investment) Management’s stock is trading at its 52-week high price post a 78% rise in last six months (as at November 07, 2017). Owing to volatility, there was a lag between improved investment performance and additional revenue in 2017 as illustrated by share price that closed at $5.76 at 30 June 2016 and moved back to around $5.72 in August 2017 after a slip to $4.23 in May 2017.

Rise in Funds under Management and returns from funds: At 30 September 2017, PTM had $24.8 billion of funds under management, which were found to be moving up to $26.5 billion as at October 2017. There has been a consistent increase in the funds in the last few months. Further, Platinum’s long only global fund, Platinum Unhedged Fund returned nearly 32% after fees and costs for the 12 months to 30 June 2017. Overall, the performance of the PTM funds improved in 2017 against 2016.
 

Funds’ Performance (Source: Company Reports)
 
Lower than expected FY17 Performance: For FY17, Platinum’s profit before income tax expense was $270.6 million (2016: $282.2 million) representing a slip of 4.1% on the previous year owing to changes in fee revenue and prevailing volatility. The profit after tax for the year was $192.6 million (2016: $199.9 million) representing a slip of 3.6%. The group had particularly highlighted that its fee revenue declined by 7.5% to $312.5 million (2016: $337.9 million) as average Funds Under Management (“FUM”) were seen to be declining by 9.6%. Based on the performance, the group had slashed its basic and diluted EPS to 31.74 cents from 34.24 cents last year, while the final dividend of 15 cents led the full year dividend to come at 30 cents which was below the 32 cents declared in FY16.
 

Platinum Global Fund Performance (Source: Company Reports)
 
Partnership with AccessAlpha for enhancing US distribution channel: The group lately appointed AccessAlpha Worldwide to distribute its global equity capabilities to the US and Canadian institutional market. The selection of AccessAlpha was based on the depth of the client relationships and the ability to market absolute return services to a North American client base. Through this move, PTM strategies will become accessible to institutional investors in the US and Canada through a range of vehicles and separately managed accounts.

Overall, the group’s one-year performance was below expectations and the return on equity that trended higher in 2015 and 2016 was found to be lowered in 2017. Further, inflows of about $115m in September along with material outperformance of the International Fund, now seem to be already factored in current valuation and stock price movement. The overall fund performance does not look highly attractive while the business has suffered meaningful outflows. PTM also expects headwinds in FY18 at the back of product fee slashes that took place in April 2017 with management estimating to have an impact on PTM’s revenue by up to A$24m on an annualised basis. Given the trading scenario and price-earnings ratio with limited growth catalysts being identified, we believe investors can take profit on the stock. We give a “Sell” recommendation at the current price of $7.89


PTM Daily Chart (Source: Thomson Reuters)

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