BT Investment Management Ltd (ASX: BTT) is one of the largest funds management organisations in Australia. Although it's a separately listed entity, it is effectively the wealth management arm of Westpac Banking Corp (ASX: WBC), via its 58% controlling shareholding.
Like other fund managers, BT offers investors great leverage to higher levels of funds under management and to higher equity markets. This leverage has led to significantly improved earnings across the group in the past 12-months; in response investors have pushed the share price of BT up 79%.
Here are 3 reasons investors may remain bullish on BT:
1) Juicy, growing dividends – Last financial year (the firm operates on a 30 September year-end), BT paid an interim dividend of 8 cents per share (cps) and a final dividend of 10 cps. Pleasingly for shareholders, the recently declared interim dividend was 16 cps – almost matching the entire dividend paid for FY 2013! The only downside is that the increasing contribution of foreign earnings to the group, has reduced the franking credits available, which have in turn meant that dividends are no longer fully franked.
2) Overseas expansion – Back in October 2011, BT undertook the company transforming acquisition of UK-based fund manager J O Hambro Capital Management. BT's UK division now contributes more revenue and profit to the group than its Australian operations. Given the potential for growth of financial services in Europe, this skew is likely to grow even more pronounced in the future.
3) Earnings Growth – Last financial year BT reported a 25% increase in funds under management to $58.3 billion. At the same time cash net profit after tax soared 49%, to $61.9 million and cash earnings per share leapt 46%, to 21.3 cps. Much like the huge rise interim dividend there has also been a huge rise in interim profits; this sets BT up for reporting a very strong full year result.
BT is not alone in benefiting from favourable industry conditions with peers Perpetual Limited (ASX: PPT) and Platinum Asset Management Limited (ASX: PTM) also performing well.
