Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Magellan surprises the market with a bumper profit and increase in dividend
Magellan Financial Group (ASX:MFG) has finally delivered a bit of good news to its shareholders after announcing a profit beat and increase in dividend in its interim result. On the back of this, the beaten-down share price is are rocketing, up 18 per cent at the time of writing.
Interim net profit came in at $251.6 million, up 24 percent on the December 2020 half, beating expectations. The rise in profit was supported by stronger-than-expected fee revenue and a $3 million profit swing from investment firm Barrenjoey, in which Magellan has a 40 per cent stake. Ongoing under-performance of its funds, plus the resignation of CEO Brett Cairns, the loss of a $23 billion mandate (one-fifth of funds under management) from UK wealth management firm St. James Place, and the absence of founder Hamish Douglass on medical leave, have combined to slash the company’s share price, from $72.40 a year ago to $18.51 earlier this month.
Despite these challenges, Kirsten Morton, interim CEO, said: “Magellan has faced a number of challenges over recent months, however, the group remains in a robust financial position and has delivered strong financial results for the period. For the half year ended 31 December 2021, the group reported adjusted net profit after tax of $248.1 million, up 16%, driven by a 12% increase in average funds under management. Excluding the earnings contribution for the period from the St James’s Place mandate, adjusted net profit after tax was broadly in line with the prior period, at $212.5 million. Magellan has declared an interim dividend of 110.1 cents per share, partially franked, up 13% on the prior period.”
MFG has a strong balance sheet, no debt, strong margins and has announced capital management initiatives to keep shareholders interested. A bonus issue of options was announced as a potential source of value for shareholders. The aim is to issue a 1-for-8 bonus issue of options to Magellan shareholders:
- Exercise price $35 per option;
- 5-year term – exercisable at any time until expiry;
- Prospectus expected to be lodged in March 2022;
- Intention to progress with an issue of approximately 10 million unlisted options to Magellan staff ($35 exercise price, 5 year term) as part of a staff retention programme and finally
- Confirming the dividend policy of 90-95% payout of the profit after tax of the Group’s Funds Management Business.
At $21.74, MFG remains well above the analysts’ consensus price target on FN Arena’s collation, which stands at $18.405.
