Australian-based Magellan Financial Group is a global equity and listed infrastructure investment firm. MFG funds are accessible to individual and institutional investors in ASX-listed and unlisted formats.
MFG gained 18% after announcing strong financial results for the half-year results. The company reported a significant surge in revenue and income, due to which the stock sky-rocketed today in the day trading. The company also cancelled the dividend reinvestment program and intends to pay dividends on March 8, 2022, due to which the stock gained value.
MFG is trading at A$21.70 and has gained more than 18% compared to yesterday’s closing session. Previously, MFG closed at A$18.32. The market cap of the company is around 4.03 billion AUD. The trading volume of the stock is approximately 1.96 million shares.
MFG: 1H 2022 Key Financials
Today the company announced its results for the first half of 2022, and its stock surged in the trading session on Friday.
- MFG announced revenue and other income surged by more than 15% to reach $384.1 million for the half-year.
- The company announced a net profit after tax or NPAT of around $251.6 million for the first half of fiscal 2022. The first half of fiscal 2022 saw more than 24% gain compared to the first half of 2021.
- After-tax, the company’s adjusted net income was $248.1, gaining more than 16%.
- The diluted earnings per share or EPS saw a gain of 15% or $1.344 per share.
- The company’s FUM or funds under management gained more than 12% compared to the first half of 2021 to reach $112.7 million.
COVID-19 Effects
The Group’s Annual Report for the year ended June 30 2021, details the COVID-19 pandemic’s effect. Despite the pandemic’s continued existence, there have been no new negative financial repercussions or COVID-19-related hazards, and the Group’s operations and services remain efficient and unaffected. The Group’s cash reserves ($291.5m on December 31 2021) and liquid investments ($482.4m on December 31 2021) more than fulfilled the Group’s liabilities and regulatory capital needs.
MFG Dividend Update
The Board announced an interim dividend of 110.1 cents per ordinary share (75%) for the half-year ending December 31, 2021. (December 2020: 97.1 cents per ordinary share, 75 percent franked). The projected intermediate dividend payment on March 8, 2022 is roughly $204,470,000 (December 2020: $178,361,000).
The company pays Interim and Final Dividends of 90-95 percent of the Group’s net earnings after tax, excluding performance fees. The funds management business’s net profit after tax includes intangible amortization and strategic initiative expenditures. The Directors will also pay an annual Performance Fee Dividend of 90-95 percent of net performance fees after tax. It will be paid yearly together with the Final Dividend. This is due to several factors, including legal and regulatory issues.
Future Growth of MFG
On February 18, 2022, the Directors announced plans to grant stockholders a 1 for eight incentive option. Each option will allow owners to acquire one extra Magellan share at $35.00 per share. A 5-year term is planned exercisable at any time until expiration. ASX will be notified of the application.
As part of broader employee retention and engagement effort, Magellan intends to offer about 10 million unlisted options with the same exercise price and 5-year period.
The company has halted all further investment under Magellan Capital Partners, which already owns stakes in Barrenjoey, Guzman y Gomez and Finclear. Management has also flagged to the market a potential buyback.
Our suggestionÂ
The Magellan share price has been bleeding for some time now. While a potential buyback is a good sign for existing investors, the biggest question mark is surrounding the FUMs. Magellan’s FUM has fallen over 22% already, and this is the most important first-line metric that determines how much revenue and earnings Magellan can generate.
We think that there are much better options out there on the ASX. While Magellan is the biggest fund manager in Australia, it’s under siege, and there are much better options out there on the ASX.
