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 MARKET REPORTS |
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Analyst report - shares
Wealth funds to overcome fears
August 10, 2007
Brendon Lau, ShareAnalysis
Almost every corner of our market seems to have been touched by the US sub-prime mortgage contagion. Notwithstanding the recent bout of panic selling, we believe wealth management companies, profits of which are tied to buoyant equity markets, are still set to deliver solid growth figures and positive outlook this reporting season.
Investors have been unduly harsh on wealth management stocks, but it is the case of guilt by association. The fallout from the embattled US housing market does not have a direct link to these wealth managers’ profits. From what we can tell, only a tiny percentage of funds under management may have been allocated to assets with exposure to the troubled US mortgage market. These assets include investments in hedge funds and private equity firms.
AXA (AXA) reported 1H07 NPAT of $374M, up 23% on 1H06. The solid result was driven by strong funds inflows in Australia, buoyant equity markets, strong claims experience in financial protection and good expense control. Hong Kong experienced strong earnings growth benefiting from recent acquisitions and strong sales growth. We maintain our BUY call on AXA.
IOOF Holdings (IFL) recently upgraded its FY07 guidance, owing to increased revenues and cost containment coming from the favourable operating conditions. It is good to see the company continues to invest in the business to drive its medium- to long-term growth. We have a BUY rating on the stock.
AMP (AMP) and Perpetual (PPT) both are benefiting from the favourable business conditions brought about by a robust economy and inflows from superannuation. PPT has provided guidance for FY07 that NPAT is expected to be 18% higher than that in the previous year. Strong growth in funds under management (FUM), an increase of over 19%, has been the driving force behind the strong performance. AMP has also benefited from the upbeat market conditions and is focusing on improving its core business in order to maintain costs and margins. We have a BUY recommendation on both stocks.
Henderson Group's (HGI's) business operations are in the UK and Europe. Its assets under management are stable at over £61B and expects to provide a capital return between £200M and £250M. We have made some significant changes to our forecasts that underestimated the strength in HGI's business. We have upgraded FY07 by 18.4% and FY08 by 25%. These changes have led to an upgrade of the stock from a Hold to a BUY.
Platinum Asset Management (PTM) is a newly listed funds management company. It has experienced healthy growth in FUM and investors participating in the float have benefited. However, it is a case of "like the company, hate the price". PTM's shares are trading at high multiples following the initial euphoria surrounding its float. We have a SELL on PTM.
Brendon Lau is the Editor of ShareAnalysis, a premium retail investment service offered by Aegis Equities Research. For more information on these stocks and for a free trial of its web-based investor research services, please go to the ShareAnalysis website.
More articles from this week's CompareShares newsletter:
Markets: Share correction insights
Smart Investing: The best of times, the worst of times
International: India on the move
Companies: Unloved offshore miners
Carbon exchange: A beginner's guide to carbon trading
Markets: Central banks pump in cash to calm fears
Investing: Wealth funds to overcome fears
Stock of the week: Regional Express Holdings
US: Uranium stocks bull run
Resident Trader: Riding the bucking bull
Forum of the Year: Battle heats up for top spot
Please note that CompareShares.com.au simply publishes analyst reports on this page. The publication of these reports does not in any way constitute a recommendation on the part of CompareShares.com.au. You should seek professional advice before making any investment decisions.
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