Fiducian (FID)

[Wolf]

Has anyone looked at FID?
Looks pretty cheap to me and I can't figure out why.


https://micocapinvestor.files.wordpress.com/2015/09/fid.png?w=640


Fiducian Group (FID) is a financial services company providing financial planning,administration and fund management services.
2015 underlying net profit increased 28% to $5.75m.
Statutory net profit was impacted by a $431k one off restructure cost, and $695k amortisation from client portfolio acquisitions.

Management are forecasting “consistent double digit earnings growth in coming years”.
Funds under advice increased substantially from 1.37B in 2014 to 1.71B in 2015 through organic growth and acquisitions.
Funds under administration and management also increased substantially.

Fiducian has a relatively fixed cost base and minimal capital expenditure requirements.
The revenue from recent acquisitions and growth in funds should directly benefit the bottom line in coming years with additional cost savings from synergies.
Management are also own heavily incentivised for the company to do well, owning 37.1% of the company.

https://micocapinvestor.files.wordpress.com/2015/09/fiddir.png?w=641&h=163 (https://micocapinvestor.files.wordpress.com/2015/09/fiddir.png)

The top 20 shareholders hold 75% of the company making Fiducian fairly illiquid which could be a reason why it is undervalued.
It seems like someone has been selling down /capping as well but no SSH notices.

However you value it multiples/dcf/peer it seems cheap.
There is obvious business risks/ financial regulation change risk/ market risk, but nothing pressing I can identify.
Would be interested in other people's thoughts.

Not advice.

[blackcap]

I hold some of these and have done for a while. Good yield as you say and latest annuals are very promising. I think we are well positioned and once the large seller goes it may move up a bit. Problem I think with FID is its size and there is just not that much interest in the company from instos and other professional investors. But that does not concern me. Happy to be able to buy where they are at now. Looks good going forward.

[mark100]

Plenty of mentions on this thread, back when the code was FPS. I tend to discuss them on hc now as this site went a bit quiet

http://www.sharetrader.co.nz/showthread.php?5046-Funds-Management-Companies/page7&highlight=fps

[PSE]

I had these some years ago but didn't figure I understood it well enough to own it. The management owns a lot but can they be trusted. I think that would be the main question for investors, trust your money with a stranger? Will funds UNder management be affected by a sharemarket slump, aren't they mainly invested in Asian markets?

[Wolf]

Plenty of mentions on this thread, back when the code was FPS. I tend to discuss them on hc now as this site went a bit quiet

http://www.sharetrader.co.nz/showthr...&highlight=fps (http://www.sharetrader.co.nz/showthread.php?5046-Funds-Management-Companies/page7&highlight=fps)



Thanks for the link Mark. I've also been discussing it on hotcopper but though it was worth sharing here. Agree with you Blackcap.

PSE,


I had these some years ago but didn't figure I understood it well enough to own it.

I agree that financial service companies like FID can be hard to understand however they have explained the business model in great detail in presentations/reports if you have a look.

Heres some of my notes on them:

Business Description
Fiducian Group is a specialist financial services company that’s been listed on the ASX since 2000. In that time it has been through significant regulation changes which Is why management decided to have a corporate restructure, finalised in 2015. So FID is better suited for the regulatory environment, which resulted in a change of ticker code from (FPS) to FID).

Fiducian has three main segments:

1. Funds under Advice
These are the funds held by the clients of FID, for which they provide advice or consultation. FID may or may not invest the funds or be involved in the decision making process for all of these assets. Rather, they will use the information to provide a holistic viewpoint for the integrated planning for all the clients’ assets. Funds under Advice is the most important metric for FID as an increase in funds under advice will lead to an increase in those under administration and management as well as further utilising their businesses services. FID’s financial planning division is made up of salaried offices and franchised offices. FID continues to make complementary acquisitions to improve its capabilities as well as add funds under advice.

2. Funds under Administration
These are the funds that are managed by FID on behalf of clients. These funds are beneficially owned by clients, and all investment decisions related to these assets are also made by clients. FID offers administrative services such as portfolio wrap administration for superannuation and investment services to financial planners. Funds under Administration have increased consistently over the past three years and is likely to continue due to the large increase in funds under advice, slow in the rate of independent financial advisor withdrawals and as FID continues to build new relationships. FID’s full service offer supported by the prior year’s product restructure could allow a non-aligned small dealer with a FID relationship to become competitive against large scale financial planning institutes.

3. Funds under Management
These are the funds being actively managed by FID. Including funds of clients for which FID makes decisions and for which they may design and/or implement an investment policy and asset allocation.
FID is a multi-asset, multi style investment manager. Designing a range of Funds that seek to deliver above average returns. The India Fund was recently voted the No 1 Australia fund in global equities for the regional and emerging markets category.

The fund management, administration and financial planning make up the majority of FID’s revenue. However additionally they provide business services and information technology which are an integral part of the value FID offers to its clients.
Business services include accounting and self managed superannuation fund administration. Their information technology includes FasTrack an administrative system providing greater control, efficiency, and cost saving and FORCe a financial planning software licensed to aligned financial planning groups.


The management owns a lot but can they be trusted. I think that would be the main question for investors, trust your money with a stranger?

I think thats a pretty unjustified statement....
Since management own a large portion of the company (Managing director even bought more today) their interests are aligned with shareholders.
An Increase/decrease in performance affects them directly so they have a lot of incentive for the company to do well.



Will funds UNder management be affected by a sharemarket slump, aren't they mainly invested in Asian markets?

Yes, that is one of the risks in financial companies. Every company will be affected in a share market slump.
In a recent report management said "FID’s diversified funds have limited exposure to China and Greece", So no they aren't mainly invested in the Asian markets.
In fact on their website you can see all their funds/performance and details.
As a financial service company and fund management provider, FID’s performance is tied largely to the performance of equity markets. During the 2008 financial crisis financial service companies saw huge declines in market capitalisations and many collapsed. This was more related to the poor regulations but a similar crisis would have a large negative effect on FID. During the 2008-2009 financial year FID’s net profit fell 48% from $6.3m to $3.3m due to a decline in funds under advice, administration and management. Where the market volatility deterred individual investors and revenue was affected by the fall in fund’s value. After surviving and actually turning a profit in the 2008 crisis it seems likely that they would be able to do so again. As management said in the 2009 annual report “Fiducian has been built to withstand external pressures”. In addition with a large amount of cash well above the required amount by regulation they are more prepared than alot of financial service companies.


Disclaimer: Not Advice.

[PSE]

Thanks for a detailed response Wolf, it is certainly an advantage that FID survived the GFC but if another recession occurs then double digit growth is not likely for a number of years.
In this case is it cheap?, maybe but not for sure.
I agree that Indy Singh may be trustworthy and is heavily invested in the business. On the other hand I bet that he has enough salted away that he won't be on the street if FID can't pay a dividend.
My distrust of management is unjustified, I consider that the burden on a company is to prove themselves trustworthy.
I was looking at Ausenco recently, the CEO Zimi Meka has a large stake but the company has proved disasterous for investors. They have now written off the Australian business.
I think FID is better, the most interesting thing to me is what the customers think, good value? Thats what I was looking for to understand the business and not being based in Australia I couldn't do it.
I popped into their Hobart office recently, seemed neat and quiet which is typical probably. Didn't tell me what I needed to know.

[PSE]

Guilty until proven innocent.
Made 4m per annum over last 9 years so probably fairly valued at $60m.
I think management's skill is not investing but accumulating funds under management. If this is the case I would prefer them to increase funds under management during a crash rather than boom times.
If I knew the product was exceptional I may consider buying it but I certainly don't know that

[Wolf]

Resistance at $1.90 smashed, currently at $2.15 :t_up:

[Joshuatree]

Good one Wolf.Why did i dither; the end of overhang was well telegraphed.

[trackers]

Well done Wolf, I sold in the 1.80s regrettably (bought 1.70s)

[blackcap]

Good one Wolf.Why did i dither; the end of overhang was well telegraphed.

Funny that isn't it, sorta shows in this case that the market is not at all efficient. But my question is for the seller... why did they persist at $1.90 when (obviously) the stock had room to move up after another great result. Or did they just want to get out at all costs and were not prepared to take on any market risk?
I am sorta kicking myself for not topping up but still happy with the ones I do hold and not looking to sell any time soon.