Hi
@AceboyIt is an important point to look at the whole Magellan business - although the fund management business is the main business of Magellan, here is a whole perspective from an earnings contribution perspective of both Funds Management, the 44% investment in Barren Joey, Mexican Take Away and FinClear. Have also excluded Asset Revaluations, as I do not believe Magellan intend to sell shares in any business.
For the comparison of the Barren Joey business, have used the latest UBS Australia Profit & Loss Statement (2020 Calendar year) and ensured dividends paid to overseas business holders was re-written back into the comparison table. UBS holds a 4% market share of the Australian investment banking market. Have assumed Barren Joey will slowly increase market share by 1% every year for four years and that it is profitable.
Quick note, keen for feedback if you believe any of the % growth numbers are out of alignment. Does anyone believe Barren Joey will be as large as UBS in 5 years? Will it be longer or shorter?
Funds Management
For the comparison of the Funds Management business I will use GQG, reduce GQG's current FUM growth rate in half (because this is where mature US based Fund Managers are performing with similar investment styles). While you mentioned the Funds Management business needs to stay stable, I have attributed an 11% FUM growth rate to Magellan, a bit more than mature fund managers in Australia and slightly less than Magellan's current three year CAGR FUM growth of 15%. It is also important to note I am expecting GQG to beat its FUM and earnings forecasts (just because GQG always over delivers, and how Rajiv Jain's funds have performed when he was a CIO at Vontobel for 20 years prior to GQG).
So to start with, Funds Management:
As you can see, over time the FUM performance difference is quite vast. Fast forward to 2025 and there is an NPAT difference of $255M.
Investment BankHere is the latest UBS Profit & Loss Statement:
Based on UBS (with a 4% market share in Australia), here is the Barren Joey modelling assuming it moves to a 4% market share over time (increasing 1% market share per annum):
Magellan shareholders will potentially see a $90M NPAT increase in five years time from the 44% share holding. It is good to have an investment grow from a zero base, but it appears to have side tracked the funds management growth.
Note, I haven't bothered putting anything together for the Mexican Take Away (151 locations), here is the Profit & Loss from Retail Zoo (owner of Boost Juice, Salsas, Betty's Burgers and Cibo Espresso - 700 locations). The whole take away business will contribute $15M per annum in NPAT at most when it multiplies its size by 4.5 times (will Australians want to eat that much Mexican food?):
Magellan owns 10% of this business, so business may contribute $1.5M to $6M to NPAT after growth over five years.
There is also FinClear which is nearing IPO. $20M investment, but I can't find the accounts to determine if this business is profitable or not. Prospectus will be out soon.
At the end of the day, I think Magellan would have been better to buy a Growth Fund Manger over in the US or UK (like Perpetual bought US based Value and ESG Style Fund Managers). It isn't too late to change tack.
@CourtShort, apologies not sure if you wanted to read above in this thread. Tried to keep business valuation out.
Best of Luck
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