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Why the Navigator Global share price has fallen 33% in 2019

The share price of investment management company Navigator Global Investments Ltd (ASX: NGI) has fallen 33% in 2019 to $2.82 at the close of Friday trade. The steep fall in the stock has occurred following the release of a disappointing business and earnings update last Wednesday.

Falling AUM

Navigator reported that its Assets Under Management (AUM) had declined for the December 2018 quarter. The decline in AUM was attributed to a number of factors, including slower than expected inflows and investment losses due to falling prices in global asset markets. Moreover, a faster than expected redemption cycle from particular transitioned MAS assets and an elongated sales cycle regarding new opportunities has also impacted AUM.

The company noted that its first-half FY19 result will not be materially impacted by the quarterly decline in AUM with earnings before interest, tax, depreciation and amortisation (EBITDA) of around US$20 million expected for the period.

However, the cumulative effect of the decline in AUM is likely to result in management fee revenue falling by around 10% in the second-half compared to the first-half. As a result, Navigator expects second-half FY19 EBITDA to be around 20% lower compared to the first half.

Navigator also noted that the projected efficiencies from the full integration of MAS into its existing business processes are on schedule but are unlikely to have a material impact on earnings for this fiscal year.

Foolish takeaway 

Navigator has not been alone in being impacted by the downturn in global asset markets over the last few months. Platinum Asset Management Limited (ASX: PTM) has seen its share price fall 5% in 2019 after it released an update last week regarding its investment income and performance fees for the first-half of FY19. The update revealed that Platinum will book an unrealised loss on its seed investments and is expected to “receive little in the way of absolute return performance fee income for the half-year ending 31 December 2018”.

In contrast to the fortunes of Navigator and Platinum, the share price of Magellan Financial Group Ltd (ASX: MFG) has been one of the best performers on the ASX in 2019. The fund manager’s share price has risen 12% in 2019 following the release of its monthly update last Tuesday.

Magellan announced that it expects to earn $42 million in performance fees for the December half-year. Furthermore, average funds under management have risen to $72.1 billion versus $53.6 billion in the prior corresponding period.

Magellan is increasingly looking like the best prospect in this sector with the stock currently trading for around 17 times adjusted trailing earnings and with double-digit earnings growth expected in FY19.

Motley Fool contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia owns shares of Platinum Investment Management Limited. 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 Scott Phillips.

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