GQG shares gain as Morgans downplays impact of Adani exposure
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The news: Shares in GQG Partners climbed on the ASX after Morgans upgraded its rating on the fund manager from 'hold' to 'add' and played down the impact of its exposure to the troubled Adani Group.
The numbers: GQG shares were up 6.22% to $2.21 by 12:14pm AEDT, having added more than 50% in the last 12 months.
Morgans, which kept its $2.47 price target on GQG, said that it does not expect the company's recent flow weakness to persist for an extended period.
The context: Morgans analysts noted that GQG likely experienced some outflows directly after announcing that it was reviewing its investments in Adani, following news that its chair Gautum Adani was charged by US prosecutors over an alleged USD250 million ($383.6 million) bribe.
The analysts said that while there is some near-term outflow risk, they do not expect this to persist based on fund performance. GQG's emerging markets fund, which has more than a 10% exposure to Adani, outperformed its benchmark by around 1% in November, they noted.
Meanwhile, over a timeframe of one to five years, all GQG's strategies have outperformed benchmarks "meaningfully", ranging from 180 basis points to 920 basis points.
The upgrade reverses Morgans' downgrade on GQG late last month. At the time, analysts said they thought the negative impact of GQG's Adani exposure "should pass reasonably quickly" but that they "would prefer to gain more confidence in that view."
What they said: "Uncertainty on the investment performance impact of the Adani news was high at the onset, but can now be assessed and has been minor to-date," said Morgans analysts.
"There is some outflow risk and Adani news flow risks (if GQG remains invested), but we believe there is solid underlying business strength and value."
The source: Morgans research
