Magellan extends gains but analysts mixed
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The news: Magellan Financial Group extended Thursday's gains on the ASX, after the investment manager said its performance fees increased in FY24 and that its funds flows were relatively stable in June.
The numbers: Magellan shares were up 4.3% to $9.46 by 12:35pm AEST, making it the second best performing stock across the ASX 200, having closed 5.97% higher on Thursday.
Jarden analysts hiked their price target on Magellan from $9.20 to $9.50 and noted that the drag on its funds under management (FUM) growth from net outflows was "clearly subsiding", down 7.8% per annum in the second half of 2024.
Jarden also lifted its earnings per share estimates for Magellan by 6.9% in FY24 and 3.4% in FY25, reflecting "significantly higher" performance fees in FY24, as well as higher FUM in June and an improved institutional net flow outlook.
However, Macquarie analysts lowered their target price for Magellan from $8.40 to $8.20, cautioning that investment performance "remains mixed".
They revised their earnings per share estimates for the stock by 4.7% in FY24 and -2.1% in FY25, flagging that investment performance hasn't improved enough to drive a recovery in flows.
The context: Jarden analysts said that "continued below-benchmark performance" over the past year across Magellan's flagship Global Fund and Infrastructure Funds has extended "medium-term underperformance".
As a result, the analysts retained a 'neutral' rating, with expectations that "the path back towards more consistent stable to positive net flows is likely to remain challenging".
Meanwhile, Macquarie analysts retained their 'underperform' recommendation. They said that Magellan's mixed investment performance saw its Global Fund improve, with its Infrastructure Fund below benchmarks and its High Conviction Fund ahead.
The fund manager has endured a challenging period over the last three years during which it has suffered investment underperformance, seen departures of senior management figures and faced significant outflows. Despite a steady improvement in FY24, Magellan’s current FUM of $36.6 billion is a fraction of the $113.9 billion corpus it held at the end of FY21.
What they said: "We still believe it's too early in the turnaround to step up to the plate. With the funds management business trading on ~11.1x FY25 earnings, the market is already pricing in a recovery, but investment performance hasn't improved enough to drive a recovery in flows," the Macquarie analysts said.
The sources: Macquarie research, Jarden research
