Still a significant potential of growth, but with a higher risk than other listed asset managers

MA Financial (ex. Moelis) has 3 businesses :
- asset management with focus on of real estate, hospitality, credit (and developing other types of assets)
- corporate advisory and equities (real estate, restructuring/credit...)
- lending, most recent business for the group.
In FY 2020, 84 % of EBITDA came from their asset management business (including lending) vs 16 % for corporate advisory (which used to be the main business of the group and represented 65 % of EBITDA in FY 17).

Established in 2009 and listed in 2017.
The company had a strong growth between 2017 and 2020, mainly driven by the growth of their asset management business which went from 0 in FY 13 to 5.4 bn in FY 20.
In 2020, covid had a significant impact on their business conditions, particularly on hospitality and age care.
As a result, the management decided to limit new business during H1 2020 (January-June 2020).

After assessing the situation, MAF management decided to go again on the offensive from H2 2020.
In H1 21 (Jan-June 21), growth accelerated with an increase of 52 % for underlying revenue, with strong growth across the 3 divisions.
As a result, underlying EPS increased by 92 % yoy during H1 and the company revised its guidance for FY 21, expecting an increase of 20 % to 30 % for their underlying EPS (vs + 10 % to + 20 % initially).

The company does not look that expensive if it can sustain its level of growth.
However, it is a more difficult case than most of the other listed fund managers, for different reasons :
- a large part of their revenues look like one offs (in their asset management business, only 50 % of revenues come from base fees, the rest are mainly performance/transaction fees and mark to market on principal investment),
- a significant part of customers fund in asset management comes from a scheme (SIV program) at risk (depend on future immigration policies),
- I suspect (need to check) that a lot of their assets under management are not listed.
By definition, we know that there is always a higher level of risks with this kind of assets.

2 main interests of MAF :
- unlike a lot of asset managers, they are getting quite large net inflows,
- they are developing a new line of business : lending, which is expanding rapidly and already getting a good return.

1/ Net inflows for their AUM business
During H1 21, they got 506 m $ of net inflows (mainly from credit and equities) vs 158 m in H1 20.
For the first 6 weeks of H2 21, they received 185 m of net inflows, evenly split between domestic and foreign clients.
There are 2 positive developments for this business : obviously the amount of net inflows, but also the origin of the net inflows. Unlike the initial period for their AUM business, they are now getting more inflows out of the Significant Investor Program visa. There is also large net inflows coming from retail (154 m during H1 21 vs 10 m during H1 20).
One of the main interest of this business : high level of average management fee, around 100 bp.
A direct function of their customer profile : 49 % of AUM comes from foreign high net worth, 30 % from retail and domestic high net worth and the rest coming from institutional investors.

2/ Lending business
Including so far with the AUM business, MAF has decided to create a new division focused on the lending business.
During H1 21, there was an increase of 160 % for their loan portfolio which reached 375 m $.
As often with them, it is not a simple lending business, but includes different activities (ex.funder of high quality loan portfolio, holding of 47.5 % in residential mortgage lending MKM...).
In H1 21, the company mentioned that the business generated an annualised return on its average capital invested of 16.5 %, ahead of group's target.