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Magellan shares surge on 62pc lift in first half profit

Emma Rapaport with AAP  |  15 Feb 2019Text size  Decrease  Increase  |  
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Global fund manager Magellan's (ASX: MFG) retail product mix and strong brand have helped it weather the Hayne inquiry storm better than some finance sector peers, says Morningstar.

The company reported a $176.3 million profit for the six months to December 31, up from $109.2 million a year earlier. Its interim dividend also increased to 73.8 cents a share, 75 per cent franked, from 44.5 cents a year earlier.

Morningstar associate equity analyst Shaun Ler credited the result to a 35 per cent lift in average funds under management across both institutional and retail divisions, which ended the half at $72 billion, along with strong market performance.

Ler calls out the strong momentum of Magellan's new products for self-funded retail investors – including its active exchange traded fund and listed investment company. FUM across these products exceeded $3.1 billion as at 31 December 2018.

Magellan shares were up 9.90 per cent to $32.09 at market close yesterday, above Ler's unchanged fair value estimate of $29.

Hamish Douglass

 

Hamish Douglass, Magellan co-founder and CEO 

Ler says Magellan is relatively insulated from the Hayne shadow looming over results season, which has knocked its peers AMP, IOOF and Platinum – citing its strong brand retail brand and internationally-sourced institutional funds.

"More than 70 per cent of Magellan's funds are sourced from institutional investors, most of them based overseas" Ler says.

"Therefore, they are not overly reliant on domestic advisers for flows, many of whom are still dealing with the fallout from the royal commission."

Outlook

Ler believes the outlook for Magellan in the short- to medium-term looks favourable.
"Magellan are good investment managers who have a record of strong outperformance. They're also coming out with new, innovative products which cater to market needs," he says.

These include Magellan's new income and retirement products, which will be pitched squarely at Australia's ageing demographic.

However, his return assumptions remain cautious with an eye on US market future performance, which has an outsized influence on Magellan's global equity strategies.

 

. Emma Rapaport is a reporter for Morningstar Australia.

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