Fund manager Australian Ethical Investment Limited (ASX: AEF) gave FY21 half year profit guidance today. Does the projection make it a great ASX share?
Australian Ethical describes itself as the country’s leading ethical investment manager. Since 1986, the company has provided investors with wealth management products that align with their values and it has been delivering strong returns.
HY21 earnings guidance
Australian Ethical said that it’s expecting its underlying net profit after tax (UPAT) for the six months to 31 December 2020 to be between $4.6 million and $5.1 million. The mid-point of that guidance is an 11% increase compared to the prior corresponding period.
The fund manager said that strong growth in funds under management (FUM) was partially offset by the impact of superannuation fee reductions including those implemented by the second half of FY20, and fee and threshold reductions across some managed funds in October 2020.
Australian Ethical believes that revenue will be more than $50 million this financial year.
Funds under management movement since 30 September 2020
FUM increased to $4.92 billion at 30 November 2020. This was an increase of 14% from $4.32 billion at 30 September 2020, and up 21.6% since 30 June 2020.
Australian Ethical explained that the increase came from exceptional investment performance of $0.43 billion and strong net flows of $0.18 billion in October and November.
Outlook
John McMurdo, the CEO of Australian Ethical, said: “We have seen excellent momentum in the first half of this financial year as a growing number of Australians seek to do good and do well with their money. Buoyed by excellent investment performance, we expect this strong growth in net inflows to continue.
“Meanwhile, we are actively implementing our strategic roadmap to ensure we realise the potential of ethical investing in delivering a better future. This includes investing in our brand, in our customer experience and in diversifying our distribution channels to maximise our reach and our impact.
“Financials in the second half of the financial year compared to the first half will be impacted by higher operating expenses, as well as increased investment in strategic and regulatory initiatives as we position our business for continued success.”
Summary thoughts
This seems like a solid update by the ethically-focused fund manager. However, it is priced for that growth with a price/earnings ratio of around 60. I think it could be worth a long term buy in this environment, but there are other ASX growth shares I like the look of more such as Pushpay Holdings Ltd (ASX: PPH).
