Shares in Pinnacle Investment Management Group Ltd (ASX: PNI) are down by almost a quarter over the past year, but according to the team at Macquarie, that presents a good buying opportunity.
The Macquarie analysts have an outperform rating on Pinnacle and a bullish share price target, which I'll get to shortly.
First, let's have a look at what Pinnacle does.
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Major investment manager
The investment manager owns substantial stakes in a number of funds, which themselves invest across a wide range of sectors.
For example, it owns a 49.9% stake in Hyperion Asset Management, which invests in global and Australian growth equities, and has a 35.9% stake in Palisade, which invests in private infrastructure.
The amount of funds under management in these so-called affiliates came in at $229.4 billion at the end of June this year, which was up 27.9% year on year.
Pinnacle has what it calls a Three Horizons growth strategy, which involves firstly growing the management side of the business, launching brand new affiliates, and also buying stakes in and growing other affiliates.
At the time of the company's FY26 financial report, Managing Director Ian Macoun said:
We continue to build Pinnacle to deliver sustained high rates of growth for many years into the future. Our distinct business model and Three Horizons growth strategy have built a highly diversified platform across asset classes, geographies and product formats. This platform has supported strong growth to date and provides multiple pathways for further growth, including in larger international markets where we have demonstrated that the Pinnacle model can operate successfully.
Mr Macoun said net inflows were robust across all three channels of the business.
Pinnacle's net profit for the year was $176.7 million, up from $134.4 million, and the company increased its dividend by 25% to 78.1 cents.
Broker says shares are looking cheap
Macquarie recently reviewed the quarterly performance of three of Pinnacle's affiliates, the Metrics Master Income Trust (ASX: MXT), the Metrics Income Opportunities Trust (ASX: MOT), and the Metrics Real Estate Multi-Strategy Fund (ASX: MRE).
The returns of these year on year came in at 8.21%, 7.38%, and 11.06% respectively, Macquarie said.
They said their outperform rating on Pinnacle shares reflects attractive organic growth supported by funds under management growth, net funds inflows, plus the potential for accretive mergers and acquisitions.
Macquarie has a price target of $23.95 for Pinnacle, compared with the current share price of $14.45.
Pinnacle is valued at $3.44 billion.
