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  1. #11
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    PPT have generally been highly regarded however they have got themselves into a bit of a pickle with a cash fund that guarantees a rate of return to investors. Due to the credit crunch this fund has not met its required rates of return and PPT is having to top it up in order for investors to get their set return.

    While this is a temporary problem it could persist for another year or so which means PPT could remain out of favour for a while yet. That said, it is looking historically cheap

    Don't now a lot about AUW. All the brokers like it and it seems to be trading on a FY08 PE of around 14. Guiness Peat do seem to have timed their exit to perfection however

  2. #12
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    FPS seems ok, but one thing I noticed when I looked at it was the constant share buybacks. Why buy back a stock that is trading well above book value?

    The answer: to make up for the issue of options to executives. I feel this is a poor use of shareholders capital.

  3. #13
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    TLA87, most of the options are issued to staff and advisers with the exercise price inline with, or at a premium to, the current share price. This is obviously to retain these staff and advisers. And it is the advisers who get the clients to invest in Fiducian funds.

    I wouldn't say it is a poor use of shareholders capital because the options still have to be exercised before they become shares and that money flows into FPS ie the shares are not free. The reason there are some options on issue with low exercise prices is due to the run up in FPS share price over the past few years. Also over the past couple of years I note FPS has still bought back more share than what has been issued due to option conversions

  4. #14
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    Mark, PPT was a bargain at about $53.00, in hindsight anyway. After paying $1.89 in dividends, they are sitting high ATM. Yields at nearly 7% and respectable PE.

    The US market went up on bad news last night. Our market are rising again today. Did we forget there will be an interest rate rise next week.

  5. #15
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    From memory FPS earns a significant portion of its revenue from charging fees on fund inflows, as well as ongoing management fees. If inflows drop, then profits drop. This is enough to make me want to steer clear.

    Please correct me if I'm wrong though.

  6. #16
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    That is correct, but that is how all funds management companies work.

    As I said in my first post on this thread it is in times of doom and gloom that funds managers are often priced most attractively. And the ones that can still post earnings growth in the times of doom and gloom are the gems.

    I'm not trying to convince you to buy FPS. I just want to know of any cheap funds managers that I may have overlooked.
    Last edited by mark100; 28-02-2008 at 02:39 AM.

  7. #17
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    FPS isn't really a fund manager though. It's more a marketing/distribution company. People give it money, which it takes a cut from, and then FPS gives that money to others to manage.

    I had a quick look at PTM - the fund outflows don't look good, especially in their funds that earn performance fees.

    Still, if you look at the margins, what a fantastic business to be in! However, not so fantastic if you paid $8 a share.

  8. #18
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    True they aren't a pure fund manager but they still collect an ongoing fee.

    They have around $3.7b in funds under management, advice and administration. Based on them posting revenue of around $30m for the FY that means they are collecting around 80bps average on this money which sounds about right. If they were only collecting a fee on the inflow they would not get anywhere near $30m revenue. I also note they are forecasting steady growth which to me indicates they aren't reliant soley on inflows for revenue.

    On PTM, true fantastic margins and they will need to improve fund performance if they want to maintain that size fee. The funds outperformed in Jan (although still lost money) so will be interesting to see if the outperformance can continue in this tricky market.

  9. #19
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    Funds management companies continue to get 'cheaper'. Many now on forward PE of 10 and below - but how well can we predict the future E?

    I don't hold any at present but I'm keeping a close eye on the sector. When the bear eventually goes into hiding earnings these stocks will get a double whammy of increasing earnings and a PE that re-rates from 10 to 15 (the oppposite of the double whammy they got on the way down).

    A few I follow:
    HFA
    FPS
    PFG
    PTM (if FUM stabilises and the share price gets closer to $2)
    HHL
    AEF (PE still to high)

    If you like the large caps there is AMP, AXA and PPT
    Last edited by mark100; 17-07-2008 at 03:53 AM.

  10. #20
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    Hi Mark100,

    Agree with your prognosis that a bear market is the time to go shopping for fund managers. The entire sector has been absolutely hammered and these stocks are the cheapest relative to FUM that they've been in a long time.

    On the topic of outfits you may have overlooked, Treasury Group (TRG) is also worth checking out if that's not already on the radar.

    These guys are basically an incubator of boutique equity managers, and have stakes in a number of managers. About 75% of their FUM are in just two managers at the moment - Investors Mutual and Orion, but they are adding new managers to the list, and the FUM growth of some of their newest funds has been impressive.

    IM has been performing poorly of late. Its performance numbers have been horrible, and by my calculation, thay have suffered $600m in redemptions so far this calendar year (most in 2Q), and they are now down to $4.2bn under management. IM are a pretty big profit contributor for TRG, and this likely accounts for TRG's recent share price weakness (even worse than the sector overall). However, the other funds continue to do relatively well, and what I like with TRG is the option it gives you on future boutiques it sets up. And IM's performance, which has suffered from having no exposure to resources, could well improve if commodity prices take a tumble.

    The company has about $1.50 a share in cash, so at $7.30 it looks very cheap. They made 44cps in the first half, so even fully marking to market recent declines in its FUM (about 20-25%), it is comfortably below a 10x PER after deducting cash.

    I also like HHL below $10. It's recent performance has been pretty good and HHL is better leveraged to growth in emerging economies. By my calculations HHL has maintained inflows up until June, where they suffered a small outflow.

    The main issue for all these companies is whether we have a protracted and painful bear market. We may have already seen the major hit to FUM from collapsing markets, but if markets continue to drift for a few years, a second-round hit from mass redemptions is possible. It is possible the likes of IM blow up under this scenario and lose most of their money. This risk is mitigated by legislated super contributions, but money can still easily move to the sidelines when people are nervous.

    Impossible to pick the bottom, but for my money I believe the risks are more than reflected in prices and I've been buying in recently.

    Cheers,
    Dimebag (holds TRG and HHL)
    Last edited by Dimebag; 17-07-2008 at 07:51 PM.

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