Magellan Financial Group Ltd (ASX: MFG) has reported its FY19 result to the market this morning, as well as announcing a new listed trust.
Magellan is a funds management business that largely invests in international shares like Facebook and Visa. It was set up in 2006 by Hamish Douglass and Chris Mackay. Since inception, Magellan claims it has been one of the most consistent market outperformers after fees.
What Magellan Reported In FY19
Magellan reported that its average funds under management (FUM) grew by 28% to $75.8 billion thanks to a strong performance by Magellan’s various funds and it also attracted a lot of new inflows because of that performance.
Due to the rise in the FUM, Magellan achieved a 22% increase of management and service fees to $472.5 million and a 35% increase of ‘adjusted’ net profit after tax to $364.2 million.
Net profit after tax (NPAT) came in at $376.9 million, whereas the market was expecting net profit to come in at $338.7 million according to CommSec and Bloomberg. So Magellan investors could be happy with this result.
Magellan reported that its profit / earnings per share (EPS) increased by 75% to 213.1 cents and its adjusted EPS grew by 33% to 205.9 cents.
Due to the strong performance, Magellan decided to increase the total dividend by 38% to 185.2 cents per share.
Magellan High Conviction Trust
The fund manager also announced the initial public offering (IPO) of the Magellan High Conviction Trust, which aims to invest in the best eight to 12 best ideas. Magellan said its unlisted strategy had returned 16.6% per year net of fees since it started in July 2013.
Investors in Magellan can apply for up to $50,000 and may receive a loyalty reward of additional units worth 7.5% of their allotment. General public applications will receive additional units worth 2.5% of the value allotted to them.
Magellan will pay for these one-off costs, but it isn’t appointing a broker syndicate and is not paying any fees or commissions to brokers or advisers to handle the raising.
Hamish Douglass said he would be taking up his priority offer and also subscribe for $20 million under the wholesale offer.
To fund the costs, Magellan will be raising $275 million from institutional investors at $55.20 per share.
The high-conviction trust will target a 3% distribution yield once operational. But it will have an annual management fee of 1.5% per year plus a performance fee of 10% over a single hurdle of 10% per year total return after management fees.
Is Magellan A Buy?
Magellan continues to impress and I think its strategy of launching listed vehicles is a good way to lock in funds under management (FUM), as long as the underlying performance continues to do well.
The Magellan share price has run up strongly, so I’m not jumping to buy shares today. But I think it is the best fund manager to own on the ASX compared to others. But at the current price, the growth shares in the free report below could be better ideas.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.