It makes perfect sense. Compared to Platinum, the ratios are very generous. It will depend on whether Magellan can stem outflow which has been accelerating in recent quarters.
Platinum’s funds have been performing better than Magellan and hasn’t been able to stem outflow. I would never have anticipated the Platinum share price would be valued at a PE Ratio of 9x, but it is.
Time will tell, but it is looking increasingly likely the reddit post is more of an accurate picture than what is being painted here on hotcopper.
If you look at it another way, assume Magellan are charging a fee of 0.75% on the $18B of FUM. This is annual revenue loss of $135M. Current annual revenue is $684M, decreases annual revenue to $549M.
Assume same net profit margin of 60% (Magellan are going to have to reduce costs and employees by 20% to achieve this), net profit is now $329.4M.EPS now becomes $1.79 on an annual basis - ($329.4M/183.638M shares on issue).
In brief, the Reddit post is probably generous using three year average metrics. Based on last weeks market valuation of 13.3x PE Ratio, future price based on loss of earnings could be $23.807 ($1.79x13.3).
All speculation until shares start to trade again, but seems reasonable based on the potential of future accelerated FUM loss, current share price valuation and other Fund Managers listed on ASX losing FUM.
Please consider the downside of investing further money in Magellan. The bottom may fall out of the share price until stability returns to FUM flows.
Best of Luck Lost
MFG Price at posting:
$29.36 Sentiment: None Disclosure: Not Held
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