The Motley Fool

Is it too late to buy into these three fund managers?

Investors have now had the opportunity to review the results from some of Australia’s leading fund managers this reporting season including results from IOOF (ASX: IFL), Platinum Asset Management (ASX: PTM) and Treasury Group (ASX: TRG). On the whole their results were pleasing with profits up and dividends up as well.

Diversified wealth manager IOOF reported an underlying net profit after tax (NPAT) up 13% to $108.8 million — underlying earnings per share (EPS) also increased 13% to 46.9 cents per share (cps) — and a boost of 14% in the full year dividend to 42 cps. The company also reported its average funds under management and advice increased by 10% to $84.8 billion year on year.

Treasury Group, which holds stakes in fund managers including Investors Mutual, Orion and RARE, reported even higher growth rates than IOOF. Underlying NPAT was up 32% to $10.6 million (reported EPS of 45 cps), the full year dividend was boosted by 18% to 40 cps and funds under management (FUM) grew 5% to $17.1 billion across its investees.

Perhaps surprisingly, highly regarded fund manager Platinum had the least impressive growth of the three. Total revenue increased a tepid 2% to $232 million on the back of a rise in average FUM of 5% to 16.8 billion. At the bottom line, NPAT increased 2% to $129 million which equated to diluted EPS of 22.58 cps and the board raised the dividend by 1 cent to 14 cps for the full year.

Foolish takeaway

The CEO of IOOF, Mr Chris Kelaher, commented on the outlook for his company, saying that: “IOOF’s higher FUMA starting point provides a solid platform for growth in 2013/14. With superannuation legislated for continuing growth, we will be well positioned to continue to gain greater market share.”

Kelaher’s statement reasonably applies to all three fund managers mentioned here. While the industry tailwinds and business economics are very good the question still remains – is it too late for investors to buy into these three fund managers?

IOOF, Treasury Group and Platinum’s share prices have all rallied strongly in the past 12 months and now trade on historic price-to-earnings multiples of around 18.5, 18 and 25 respectively. At these levels investors may prefer to wait for a lower entry price or search elsewhere for exposure to this industry tailwind.

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Motley Fool contributor Tim McArthur owns shares in Treasury Group.

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