Is the GQG (ASX:GQG) share price a buy in this volatility?

Are GQG Partners shares good value during this correction?

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Key points

  • Fund manager GQG Partners has seen its share price drop in recent weeks
  • Broker Morgans sees longer-term growth potential in the business, with ongoing FUM growth
  • GQG is also expecting to pay a sizeable dividend in the coming years

Is the GQG Partners Inc (ASX: GQG) share price an opportunity during this ASX share market correction?

What is GQG Partners?

GQG is one of the largest fund managers on the ASX. It’s fairly new to the ASX, having listed in October 2021.

It describes itself as a global boutique asset management business, it’s focused on active equity portfolios. GQG was co-founded by executive chair and chief investment officer Rajiv Jain and CEO Tim Carver.

GQG has four main investment strategies – global equities, US equities, non-US international shares and emerging markets shares.

What’s happening to the GQG share price?

It has been a tough time for GQG shareholders recently. On Tuesday alone GQG fell by 5.5%. Since 8 November 2020 it has fallen by 20%. That’s despite the business displaying ongoing funds under management (FUM) growth.

Indeed, at 31 December 2021 GQG had managed to grow its FUM to a total of US$91.2 billion. That was an increase from US$87.3 billion at 30 November 2021 and $85.8 billion at 30 September 2021, respectively.

However, it may be worthwhile noting that most of the share market has been going through difficulties in 2022 as investors worry about inflation and quicker-than-expected interest raises, as well as a possible conflict between Ukraine and Russia.

What do brokers think of the company?

Morgans is one of the brokers that has provided its thoughts on GQG in its early life on the ASX.

The broker thinks that the business looks good value, with a buy rating on the GQG share price.

Morgans reckons that it’s attractive considering the growth opportunity it has, as well as its quality profit and net inflows.

Combining the net inflows of US$3.2 billion in the first quarter of FY22 and $3 billion in the second quarter, the first half of FY22 to December 2021 showed net inflows of US$6.2 billion for the ASX share.

GQG says that it continues to see business momentum across multiple geographies and channels. It’s regularly winning new clients and relationships. Its newer strategies and products are seeing strong adoption.

One interesting thing that the company noted is that its management fees continue to comprise the vast majority of its net revenue, as opposed to performance fees.

The largest shareholders in GQG are the management team, which remains highly aligned with all shareholders, and are “acutely focused on and committed to GQG’s future”.

At the current GQG share price, it’s valued at 16x FY23’s estimated earnings.

Potential to be an ASX dividend share

In its prospectus, GQG said that the directors intend to target an annual payout ratio of between 85% to 95% of GQG’s distributable earnings. This dividend is expected to be paid quarterly. The first dividend is expected to be paid in March 2022.

Looking at Morgans’ estimate for the dividend, GQG is expected to have an unfranked dividend yield of 8.7% in FY23.

Should you invest $1,000 in GQG right now?

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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