Platinum Asset Management (PTM)

Transcription

1 24 February 2017 Analyst Lafitani Sotiriou Associate Analyst James Filius Authorisation TS Lim Recommendation Hold (unchanged) Price $5.10 Target (12 months) $4.90 (previously $4.75) Expected Return Capital growth -3.9% Dividend yield 5.9% Total expected return 2.0% Company Data & Ratios Enterprise value Market cap $2,742m $2,992m Issued capital 586.7m Free float 41% Avg. daily val. (52wk) $9,485, month price range $4.64-$6.75 GICS sector Price Performance Diversified Financials (1m) (3m) (12m) Price (A$) Absolute (%) Rel market (%) Platinum Asset Management (PTM) Cutting buyback from our numbers Better result, offset by removing buyback estimate PTM has delivered a better than expected 1H17 result, 3.4% ahead of our estimate. However, much of the resetting of our earnings has been offset by the removal of any buyback in our numbers. In September 2016 PTM announced, for the first time in recent years, the commencement of an on-market share buyback program. Unfortunately the announcement has been followed by inaction, despite there being enough cash to do so and there having been share price weakness since the announcement. As such, we have removed any estimate of a Buyback, and this has largely offset the benefit of the slight beat in the result. Overall we remain cautious on PTM, given the significant level of fund outflows in the last year, however believe the current dividend of ~6.0% provides support to the share price at current levels and maintain our Hold recommendation. Result highlights 1H17 underlying NPAT down 15.1% vs pcp to $94.2m, 3.4% ahead our estimate; 1H17 reported NPAT of $97.5m, down 18.5% vs pcp, ahead $91.1 BPe; Net-flows for the half -$1.7 billion, retail fund outflows -$1.4 billion; Cost to fee ratio remains constrained at 15%, vs 14% pcp; and Interim dividend of 15cps (fully franked) vs our estimate of 14cps. Earnings revisions Following the 1H17 result, we have subtly upgraded our underlying EPS by 1.0%, - 0.1% and 0.8% for FY17, FY18 and FY19 respectively. The revisions are largely driven by a better 1H17 result than anticipated, offset to a large degree by the removal of any buyback from our estimates. We have increased our Price Target slightly to $4.90 per share (previously $4.75) and retain our Hold recommendation. Absolute Price $10.0 $9.0 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 Feb 15 Aug 15 Feb 16 Aug 16 Feb 17 PTM S&P 300 Rebased SOURCE: IRESS Earnings Forecast Year end June e 2018e 2019e Sales revenue (A$m) EBITDA (A$m) NPAT (adjusted) (A$m) EPS (adjusted) (cps) EPS growth (%) -3% -10% 4% 4% PER (x) Price/book (x) EV/EBITDA (x) Price/CF (x) Dividend ( ps) Yield (%) 6.3% 5.9% 6.1% 6.3% ROE (%) 55.5% 48.5% 48.9% 49.6% Franking (%) 100.0% 100.0% 100.0% 100.0% SOURCE: BELL POTTER SECURITIES ESTIMATES BELL POTTER SECURITIES LIMITED ACN AFSL DISCLAIMER AND DISCLOSURES THIS REPORT MUST BE READ WITH THE DISCLAIMER AND DISCLOSURES ON PAGE 6 THAT FORM PART OF IT. Page 1

2 PTM FUM & Net-flows Figure 1 Annual and Half year Net-flows ($m) Figure 2 - Funds Under Management (FUM) ($m) Annual Net-Flows HalfYear Net-Flows FY12 FY13 FY14 FY15 FY16 1H16 2H16 1H17 32,000 30,000 28,000 26,000 24,000 22,000 20,000 18,000 16,000 14,000 Retail Institutional SOURCE: COMPANY DATA SOURCE: COMPANY DATA Figure 3 - PTM Funds Under Management ($m) Platinum (PTM) 2014a 1H15a 2H15a 2015a 1H16a 2H16a 2016a 1H17a 2H17f 2017f 1H18f 2H18f 2018f Jun-14 Dec-14 Jun-15 Jun-15 Dec-15 Jun-16 Jun-16 Dec-16 Jun-17 Jun-17 Dec-17 Jun-18 Jun-18 FUM (A$m) Platinum Trust Funds Open 13,170 15,861 18,207 15,861 19,117 19,105 19,117 16,539 Flow s ,318 distributions ,425-1, Market 2,240 1,844 1,926 3, ,481 1,528 Close 15,861 18,207 19,117 19,117 19,105 16,539 16,539 16,749 MLC - Platinum Global Fund Open 1,028 1,079 1,089 1,079 1,113 1,045 1, Flow s distributions Market Close 1,079 1,089 1,113 1,113 1, Management Fee Mandates Open 1,964 2,119 2,178 2,119 1,977 1,968 1,977 1,849 Flow s distributions Market Close 2,119 2,178 2,375 2,375 1,968 1,849 1,849 1,973 Performance Share Fee Mandates (absolute) Open Flow s distributions Market Close Performance Share Fee Mandates (relative) Open 3,002 3,190 3,515 3,190 3,545 3,361 3,545 2,218 Flow s , distributions Market Close 3,190 3,515 3,545 3,545 3,361 2,218 2,218 2,315 Total FUM Open 19,764 22,942 25,724 22,942 26,859 26,785 26,461 22,688 23,178 22,688 23,271 24,041 23,271 Flow s ,867-1,440-1, , distributions ,425-1, Market 3,451 2,514 2,748 5, ,323-1,824 2, , ,870 Close 22,942 25,724 26,859 26,859 26,785 22,688 22,688 23,178 23,271 23,271 24,041 24,341 24,341 SOURCE: COMPANY DATA Page 2

3 Interim earnings & estimate revisions Interim earnings Figure 4 - Interim earnings INCOME STATEMENT Y/e June 30 ($m) 1H16 2H H17 2H17e 2017e 1H18e 2H18e 2018e 1H19e 2H19e 2019e Sales revenue Operating Expenses EBITDA Depreciation & Amortisation EBIT Net Interest Pre-tax profit Tax Adjusted profit One-off items Reported net profit ASSUMPTIONS Y/e June 30 1H16 2H H17 2H17e 2017e 1H18e 2H18e 2018e 1H19e 2H19e 2019e FUM movements ($m) Open 26,859 26,785 26,461 22,688 23,178 22,688 23,271 24,041 23,271 24,341 25,001 24,341 Net-flows 427-1,867-1,440-1, , Distribution Market ,323-1,824 2, , , ,946 Close 26,785 22,688 22,688 23,178 23,271 23,271 24,041 24,341 24,341 25,001 25,187 25,187 Growth (%) 0% -15% -16% 2% 0% 3% 3% 1% 5% 3% 1% 3% Average FUM ($m) 27,165 24,432 25,798 23,328 23,369 23,348 23,718 24,422 24,070 24,724 25,316 25,020 Revenue ($m) Management Fees Performance Fees Administration Fees Total Fees DPS (cps) Franking 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% SOURCE: COMPANY DATA AND BELL POTTER SECURITIES ESTIMATES Figure 5 - Earnings revisions SOURCE: COMPANY DATA AND BELL POTTER SECURITIES ESTIMATES Earnings revisions Following the 1H17 result, we have subtly upgraded our underlying EPS by 1.0%, -0.1% and 0.8% for FY17, FY18 and FY19 respectively. The revisions are largely driven by a better 1H17 result than anticipated, offset to a large degree by the removal of any buyback from our estimates. Earnings Revisions FY17e FY17e (new) (previous) % Change FY18e FY18e (new) (previous) % Change FY19e FY19e (new) (previous) % Change EPS (underlying) cps % % % Dividend ( ps) % % % Page 3

4 Platinum Asset Management overview Company description Platinum is an investment manager. The flagship product is the Platinum International Fund which has historically outperformed relative to its benchmark. However, the last two years have been difficult for the fund with it delivering negative absolute and index relative returns. The company is based in Australia, with only the one office in Sydney, catering for 70 employees. Listed on the ASX, only 37% of the stock is free float. Investment case We remain concerned around net-flows, as we estimate these are still negative. However, the improving performance and lower share price justifies our Hold recommendation. Risks We see the main risks for Platinum as: Key people risk Similar to other wealth management businesses, the loss of any key investment personnel may result in the loss of investment mandates. This is particularly relevant for Platinum, with the majority shareholder and driving person behind the firm, Kerr Neilson, carrying a large risk should anything happen to him, or he decide to leave; Performance risk Investors are wary of investment managers that charge active management fees and that have underperformed the index over a prolonged period of time. It is important for Platinum to maintain reputable performance metrics across its product offering; Market risk Share market levels can be impacted by a range of exogenous factors such as interest rates, inflation, currency movements and general global events. Any significant movements in equity prices can have a material impact on PTM earning; Currency risk Significant currency variations may impact the underlying performance of PTM funds ; and Regulatory risk PTM invests in in varying countries and global markets. Any changes to legislation or regulations may significantly impact the company and the financial performance of PTM and the value of its funds. Page 4

5 Platinum Asset Management Platinum Asset Management (PTM) 24 February 2017 as at 24 February 2017 Recommendation Hold Price $5.10 Target (12 months) $4.90 Table 1 - Financial summary Platinum (PTM) Price Target (A$) 4.90 Share Price (A$) 5.10 Recommendation: Hold Market Cap (A$b) 3.0 INCOME STATEMENT VALUATION DATA Y/e June 30 ($m) e 2018e 2019e Y/e June 30 ($m) e 2018e 2019e Sales revenue Net profit adj ($m) Operating Expenses Adjusted EPS (c) EBITDA EPS growth (%) 6% -3% -10% 4% 4% Depreciation & Amortisation P/E ratio (x) EBIT CFPS (c) Net Interest Price/CF (x) Pre-tax profit DPS (c) Tax Yield (%) 9.2% 6.3% 5.9% 6.1% 6.3% Adjusted profit Franking (%) 100% 100% 100% 100% 100% One-off items EV/EBITDA (x) Reported net profit Price/book (x) NTA ($) CASHFLOW Y/e June 30 ($m) e 2018e 2019e PROFITABILITY RATIOS EBITDA Y/e June 30 ($m) e 2018e 2019e Change in provisions EBIT/sales (%) 82.7% 81.5% 80.4% 80.6% 80.8% Working capital change Return on assets (%) 72.6% 72.7% 63.8% 64.6% 65.5% Net interest Return on equity (%) 56.5% 55.5% 48.5% 48.9% 49.6% Tax paid Dividend cover (x) Other Effective tax rate (%) 29.2% 29.2% 29.5% 29.5% 29.5% Operating cashflow Capex LIQUIDITY AND LEVERAGE RATIOS Investments Y/e June 30 ($m) e 2018e 2019e Asset sales Net debt/(cash) ($m) Other Net debt/equity (%) -94% -71% -67% -67% -68% Investing cashflow Current ratio (x) Equity raised Dividends paid INTERIMS Other Half end December 31 ($m) 1H15 1H16 1H17 1H18e 2019e Financing cashflow Sales revenue Net change in cash EBIT Cash at end of period Pre tax profit Adjusted profit BALANCE SHEET One-off items Y/e June 30 ($m) e 2018e 2019e Reported profit Cash Interim DPS (cents) Receivables Interim adjusted EPS (cents) PPE Intangibles ASSUMPTIONS Other Y/e June e 2018e 2019e Total assets Payables FUM movements ($m) Debt Open 22,942 26,461 22,688 23,271 24,341 Provisions Flows, distributions and market 3,917-3, , Other Close 26,859 22,688 23,271 24,341 25,187 Total liabilities Growth (%) 17% -16% 3% 5% 3% Shareholders equity Total shareholders funds Average FUM ($m) 26,148 25,798 23,348 24,070 25,020 W/A shares on issue Revenue ($m) Management Fees Performance Fees Administration Fees Total Fees SOURCE: BELL POTTER SECURITIES ESTIMATES Page 5

6 Recommendation structure Buy: Expect >15% total return on a 12 month view. For stocks regarded as Speculative a return of >30% is expected. Research Team Staff Member TS Lim Sam Haddad Jonathon Higgins Title/Sector Head of Research Phone tslim shaddad jhiggins Hold: Expect total return between -5% John O Shea joshea and 15% on a 12 month view Chris Savage csavage Sell: Expect <-5% total return on a 12 month view Jonathan Snape Tim Piper John Hester Healthcare jsnape tpiper jhester Speculative Investments are either start-up enterprises with nil or only prospective operations or recently commenced operations with only forecast cash flows, or companies that have commenced operations or have been in operation for some time but have only forecast cash flows and/or a stressed balance sheet. Such investments may carry an Tanushree Jain Financials TS Lim Lafitani Sotiriou Resources Peter Arden David Coates Associates James Filius Healthcare/Biotech Banks/Regionals Diversified Resources Resources Associate Analyst tnjain tslim lsotiriou parden dcoates jfilius exceptionally high level of capital risk and volatility of returns. Bell Potter Securities Limited ACN Level 38, Aurora Place 88 Phillip Street, Sydney 2000 Telephone The following may affect your legal rights. Important Disclaimer: This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. In the USA and the UK this research is only for institutional investors. It is not for release, publication or distribution in whole or in part to any persons in the two specified countries. In Hong Kong this research is being distributed by Bell Potter Securities (HK) Limited which is licensed and regulated by the Securities and Futures Commission, Hong Kong. This is general investment advice only and does not constitute personal advice to any person. Because this document has been prepared without consideration of any specific client s financial situation, particular needs and investment objectives ( relevant personal circumstances ), a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the representative of such licensee, who has provided you with this report by arraignment with Bell Potter Securities Limited) should be made aware of your relevant personal circumstances and consulted before any investment decision is made on the basis of this document. While this document is based on information from sources which are considered reliable, Bell Potter Securities Limited has not verified independently the information contained in the document and Bell Potter Securities Limited and its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility for updating any advice, views opinions, or recommendations contained in this document or for correcting any error or omission which may become apparent after the document has been issued. Except insofar as liability under any statute cannot be excluded. Bell Potter Limited and its directors, employees and consultants do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this document or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this document or any other person. Disclosure of interest: Bell Potter Securities Limited, its employees, consultants and its associates within the meaning of Chapter 7 of the Corporations Law may receive commissions, underwriting and management fees from transactions involving securities referred to in this document (which its representatives may directly share) and may from time to time hold interests in the securities referred to in this document. ANALYST CERTIFICATION Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers and were prepared in an independent manner and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report. Page 6