VGI Partners Limited 

VGI Details

Business Update: VGI Partners Limited (ASX: VGI) specialised in investment and managing client-focused equity portfolios and manages equity mutual funds of high-net worth individuals or other businesses by investing in public equity markets across the globe. As per VGI, the market capitalisation as of 1 June 2021 stood at $431.24 million. As per a recent announcement, VGI has appointed Jonathan Howie as the Chief Executive Officer of the company. Jonathan is expected to build on investor relations with his operational and risk management capabilities.

VGI’s investment approach is shielded trade in high-quality business, which makes capital safe. The company has strategies to invest in less risk profile and the broader market and has some well-known stocks in its portfolio.

Improvement in FUM:  Funds Under Management saw an uptick to $3.2 billion as of 31 March 2021, compared to $3.1 billion in 31 December 2020. It ended the period with a cash position of ~$42 million as of 31 December 2020, with no debt on the balance sheet.

FUM as of 31 March 2021 (Source: Company Reports)

Outlook: The company has a pay-out target ratio of 50% to 75% of normalised NPAT. It adjusted its investing methodology and recycled capital into businesses taking COVID-19 as a catalyst to accelerate on the growth. This strategy is expected to provide decent returns in the future.  

Key Risks: Due to the COVID-19 outbreak, there was an adverse impact in the equity markets that impacted the performance of portfolio.

Stock Recommendation: The company targets absolute returns of 10-15% p.a., net of fees. The stock of VGI is trading below its average 52-weeks’ levels of $5.800-$9.800. The stock of VGI gave a negative return of ~23.15% in the past six months and a negative return of ~2.4% in the past one week. On a TTM basis, the stock of VGI is trading at an EV/Sales multiple of 7.5x, lower than the industry average (Financials) of 10.9x. Considering the current trading levels and valuation on TTM basis, expected recovery in economy, robust balance sheet and liquidity position, increase in FUM, qualitative approach of investing and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $6.400, up by 3.559% as on 1 June 2021. 

VGI Daily Technical Chart, Data Source: REFINITIV

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.

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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