Should you buy BT Investment Management Ltd today?

BT Investment Management Ltd (ASX: BTT) shares are flat today after the international equities manager reported its financial results for the year ending 30 September 2017. Below is a summary of the results with comparisons to relevant prior corresponding periods.

  • Statutory net profit of $147 million, up 4%
  • Adjusted cash net profit of $173.1 million, up 11%
  • Total fee revenue of $491 million, down 1%
  • Operating expenses $281.9 million, down 5%
  • Forecasting fixed costs to increase 13%-15% in FY 2018
  • Performance fee revenue $37.9 million, down 51%
  • Closing funds under management $95 billion, up 14%
  • Cash earnings per share of 55.3 cents, up 9%
  • Total dividends of 45 cents per share, up 7%
  • Final dividend of 26 cents per share

This was another strong year from the equities manager with its CEO boasting of a “fifth consecutive record result” supported by strong equity markets, net capital inflows, and the successful operational performance of the company.

The lowlight for investors and the firm was the halving of performance fees that are generated when the group’s funds outperform their benchmarks, with some of its defensively-positioned funds across the JO Hambro business lagging a bullish year for equities.

BT Investments has been supported by a 5-year equity bull market and the group’s retail distribution and institutional business development networks also appear sound, with investment performance reasonable by industry standards.

The Europe-focused group also flagged a cost increase around the EU’s upcoming Markets in Financial Instruments Directive (MiFID) II reforms that are the handbook for the provision of investment services across Europe.

It also has the impact of Brexit to negotiate and a reported regulatory investigation in the UK relating to services paid for from dealing commissions. For examples payments made to sell side brokers by fund managers for the provision of investment research has long been under the micro-scope of regulators globally.

BT Investments remains part-owned by Westpac Banking Corp (ASX: WBC) and the stock’s gains of 404% over the past 5 years prove that it’s a decent quality fund manager enjoying ebullient equity markets.

Selling for $10.90 the stock changes hands for 20x trailing earnings, which is a touch full for my liking given it’s a mature business forecasting fixed costs to increase 13%-15% in FY 2018.

In the asset management space I would still prefer the mix of growth, value and yield currently offered by Macquarie Group Ltd (ASX: MQG) with shares changing hands for $97.50.

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Motley Fool contributor Tom Richardson owns shares of Macquarie Group Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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