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Why shares of this ASX investment bank tumbled 7% today

The Moelis Australia Ltd (ASX: MOE) share price ended 7.48% lower today after the ASX investment bank released its full-year FY19 results.

What did Moelis announce?

For the full-year to 31 December 2019, Moelis recorded strong growth in revenue with statutory revenue up 7% to $153.7 million and underlying revenue up 16% to $158.3 million.

However, statutory earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 8% to $52.0 million, down from $56.2 million in the prior corresponding period (pcp). Additionally, statutory net profit after tax also came in lower, declining by 23% to $23.5 million. Despite this, underlying EBITDA showed a more positive result, up 6% from $59.8 million in the pcp to $63.5 million in FY19.

Statutory earnings per share (EPS) decreased during the period, falling 23% from 20 cents in the pcp to 15.5 cents.

On a more positive note, Moelis reported growth in net assets under management (AUM) of $1.2 billion, taking total AUM 32% higher on FY18 to $4.9 billion. The company also reported that underlying revenue in asset management increased 14% to $96.7 million.

Key strategic hires in all areas of the business was a central part of an investment for future growth strategy. In total, the company hired 24 team members across the group in FY19.

Moelis declared of a fully franked dividend of 10.0 cents per share, which was an increase of 25% on FY18. The dividend record date is 27 February 2020 with payment expected on 4 March 2020.

Strong cash balance

Moelis recorded an average cash balance in FY19 of $109.5 million, reflecting its prudent capital management strategy that provides flexibility and assists future growth.

At 31 December 2019, the company’s cash balance was $128.8 million. Moelis commented that this high balance is after investing $27.2 million in a successful buy-back of 8 million shares at $3.40 per share. Moelis estimates that the impact of the share buy-back increases future EPS by approximately 5%.

Asset management division

Moelis’ asset management division accounted for around 77% of Moelis’ underlying EBITDA before corporate overheads in FY19.

Overall, asset management revenue which is recurring in nature represented 74% of total underlying revenue for the company’s asset management activities. Importantly, Moelis noted that its base management fee income grew by 21% in FY19.

2020 outlook

Moelis noted that it has approximately $57 million of core borrowings. Of this, approximately $32 million is due for repayment in the second half of FY20.

The company has been reviewing the most cost-effective means to refinance or extend the maturity of this debt facility and according to management, pipeline of client inflows and transaction opportunities is strong.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. 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 Scott Phillips.