MAGELLAN FINANCIAL GROUP LIMITED (ASX:MFG) - Ann: Funds Under Management - October 2020, page-9 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

Originally posted by TimtamTom: ↑

Hi Lost

Really appreciate your great spreadsheet updates of FUM growth for various managers. Provides good insight. I notice however you always have a sell sentiment, so here's my counter...

I think you are focusing on FUM too much. I understand these companies are funds managers, so funds under management is obviously somewhat important - but at the end of the day, punters like you and I own companies which are meant to be profitable and make money for their shareholders.

The CAGR, as shown in your sheet for PAC is 3.3x greater than MFGs, yet MFG severely outperformed PAC on the market across the last year. Why?

My opinion...at the end of the day, the companies are here to make money, and PAC did not do that. The EOFY 2020 EPS for PAC was -35.88c...as in PAC lost money, to the tune of $16.3M.

MFG on the other hand, took home $477M in profit for EOFY 2020 and had an EPS of $2.18.

So I would prefer a company with a lower FUM CAGR but positive EPS. Both companies had the same market conditions, and one severely outperformed the other. Now I'm sure that they most likely only lost money in that financial year alone and not in the previous (I assume) - but MFG continues to be profitable in the same conditions.

What are your thoughts?

Also, I'm looking forward to that long awaited MFG sustainable funds and retirement income products. Wonder how much FUM that will generate!

Timtam

P.S: my sentiment is HOLD. Gotta look for that US sell off and aim for MFG sub $55 if you can.

PAC

MFG

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Hi TimtamTom

Thanks for your counter response and appreciate the time you have taken. May have given wrong impression by previous response, always focused on the whole metrics, not just FUM growth. I have another spreadsheet that measures growth in Dividends and EPS over 5 years. This coupled with FUM growth and Operating Margin paint picture of valuable growth and recent performance trends. Here is the other spreadsheet with older share prices:

In terms of PAC, believe what you have presented highlights the issue with market valuation differences and why there is a discrepancy. I focus on underlying NPAT and its trends across all Fund Managers when analysing.

The reason for that is if you look at the same figures of PAC from previous years 2019 was EPS of 78.95c (as per your screenshot from 2020 Annual Report) and the year before that EPS was $2.04 (PAC would not have had a $60 share price with this EPS figure). This is applicable to PAC and PNI as they own parts of boutique investment managers and are subject to accounting revaluations each year that do not reflect business performance (no fund manager listed on ASX is 100% comparable).

Long way of answering your question, I prefer all FUM, Dividend and EPS to have high growth, coupled with low PE ratio and high dividend yield.

I invest in PTM on the basis of potential growth returning and a couple of PTMs newer funds hopefully expanding - health and technology funds have been returning above market averages. They are a well run business with High Operating Margins and with the potential of returning back to market favour too. FUM hasn’t been growing much, nor has the share price, but hope my capital is unlikely to decline over the next couple of years.

Best of Luck
Lost