Magellan Financial Group Ltd (ASX: MFG)

Acquisitions to strengthen position: Down 6.4% on February 06, 2018, Magellan Financial Group released its interim results (1H18) with average funds under management (FUM) up 25%, management and services fees rising 22% to $178.9 million with revenue growth of 28% to $195.8 million. Net profit after tax (NPAT) after Magellan Global Trust net offer costs was down 39% to $53.5 million with earnings per share (EPS) slipping 39% to 31 cents per share. However, the group’s dividend per share was up 16% to $0.445. The Underlying Group profit after tax excluding the MGG net offer costs grew by 25% as compared to prior year and was recorded to $109.2 million.
 
Meanwhile, the group also updated the market about two EPS accretive acquisitions which will separately diversify and will strengthen its retail funds management business in Australia and will add a significant focus to its institutional distribution activities in North America. Total consideration payable in respect of the acquisition comprises of US$15 million in cash and 4.5 million of Magellan shares. These acquisitions are expected to be modestly accretive to Magellan’s earnings per share in the first full year. The first acquisition is of Airlie Funds Management which is expected to complete on 28 February 2018. The Airlie Industrial Share Fund will leverage Airlie’s pre-eminent expertise in Australian equities and Magellan’s operational expertise and will give distribution strength in the retail and adviser market. Second acquisition is of Frontier Partners Group and it was completed on 5 February 2018. Magellan has restructured the fee arrangements with Frontier following the acquisition and will cease paying the success fees to Frontier Partners Inc. Given the price dip in view of future potential, we recommend a “Buy” on the stock at the current price of $25.21
 

Business Overview (Source: Company Reports)

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