MENU

Magellan Financial Group Ltd reports, announces acquisitions: share price down 7%

Magellan Financial Group Ltd (ASX: MFG) runs a variety of high-performing internationally-focused funds, it has reported its half-year figures to 31 December 2017 today.

Some of the highlights, compared to the prior corresponding period of 31 December 2016, include:

  • Management and services fees up 22% to $178.9 million
  • Revenue up 28% to $195.8 million
  • Net profit after tax (NPAT) after Magellan Global Trust (ASX: MGG) net offer costs down 39% to $53.5 million
  • Earnings per share (EPS) down 39% to 31 cents per share
  • EPS before Magellan Global Trust net offer costs up 25%
  • Dividend per share up 16% to $0.445
  • Average funds under management (FUM) up 25%

Most of these figures are clearly positive, the one downside being the short-term negative effect of the Magellan Global Trust costs. Management said that this move was strategically important and value accretive for shareholders, it provides a 21% post-tax return on investment.

Some people may criticise the Magellan Global Trust launch, but I think it was a good move for two reasons. Firstly, there was demand for it by retail investors who wanted more of their returns to be paid through income rather than capital growth. Secondly, it locks in FUM for Magellan as it’s a closed-ended structure.

Magellan has been growing at an impressive rate for a long time, yet it still achieved 25% growth of ‘underlying’ EPS and FUM which was impressive in my opinion. Retail investors, advisors and institutional investors are clearly attracted to the fund manager’s investment hunting ground, process and performance.

Management appeared happy with sponsoring Cricket Australia after increasing the marketing expense from $1.5 million in the prior corresponding period to $6.7 million. Magellan said that Cricket Australia and The Ashes ‘provides a highly scalable platform with very appealing demographics’.

Acquisitions

Magellan also announced two acquisitions that it expects to be modestly EPS accretive and provide an attractive return on capital.

The first acquisition is Frontier Partners, which has been Magellan’s distribution partner in North America since 2011. Frontier was founded by Bill Forsyth in 1993 and will become Executive Chairman of Magellan’s business in North America, which represents around AU$12.8 billion.

The Frontier acquisition was completed on 5 February 2018 and will be funded by internal cash and by the issue of Magellan shares. After completion Magellan will no longer pay US marketing and consulting fees, which will improve the economics on mutual funds.

The second acquisition is Airlie Funds Management. Airlie has over $6 billion in FUM, mainly with institutional and high net wealth clients.

Magellan describes Airlie as a first-class fund manager with a proven track record in Australian equities. Airlie and Magellan intend to launch an active exchange-traded fund (ETF) which will be called the Airlie Industrial Share Fund.

The total consideration for both acquisitions is US$15 million cash and around 4.5 million Magellan shares.

Foolish takeaway

I think it’s a very interesting move that Magellan is opening up to the domestic FUM market to generate more funds to manage, it could be a smart move and create another avenue for growth.

The Magellan share price is currently down 7.36%, although some of this is due to the fall in value of the US share market.

I think Magellan could be worth a long-term buy at the current price, but I’d wait until the sharp falls in the US stop as there could be an even better Magellan share price to buy at in a few days.

Magellan may be a good buy, but I think some of these top stocks could be an even better buy.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison owns shares of MAGLOBTRST UNITS. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!