Pinnacle Investment Management: Global delivers performance fee growth

About the author:

Scott Murdoch
Author name:
By Scott Murdoch
Job title:
Analyst
Date posted:
05 January 2021, 12:00 PM
Sectors Covered:
Contractors/Developers, Consumer, Diversified Financials

  • Pinnacle Investment Management (ASX:PNI) has announced 1H21 performance fees of A$11m (PNI NPAT share), up from a very minor contribution in 1H20 and 1H19. Performance fees beat our expectation of ~A$8.5m. Hyperion Global fund was the primary contributor.
  • We expect PNI’s result to show that net inflows have maintained solid momentum in 2Q21.
  • We retain an Add recommendation based on the embedded growth in the business (the maturing profile of existing Affiliates and investment strategies) and future optionality from adding new Affiliates.
  • Material performance fees booked for 1H21

    Pinnacle Investment Management (ASX:PNI) has announced its performance fee outcome for 1H21, with 100% (affiliate level) gross performance fees of A$44.3m (1H20 A$0.5m; 2H20 A$26.2m). PNI’s NPAT share of performance fees will be ~A$11m (pcp negligible).

    We estimate Hyperion accounted for the majority of the fee (~A$8m), with other contributing affiliates including Coolabah, Firetrail and Spheria.

    Investment performance was solid across most of the managers in 1H21 (reviewed in our recent note Performance is powerful).

    Standout fund performers for the six months were (approx. %): Hyperion Global 28.5% (MSCI World AUD 10%); Firetrail High Conviction 19.2% (ASX200 11.7%); Spheria Aust Small Companies 34% (ASX Small Cap index 19%).

    PNI expects the net return on Principal Investments in 1H21 to be A$0.8m (dividends and distributions A$1.4m; and net loss on financial assets including hedging of A$0.6m). The Principal Investment outcome compares to A$0.4m in the pcp.

    Changes to forecasts

    We make minor changes to FY21 assumptions and add ~A$2.5m in performance fee contribution leading to a 7.6% FY21 EPS upgrade. We make no changes to FY22/23 forecasts.

    Solid momentum – Add maintained

    Our DCF increases slightly (Clients can login to view price targets and detailed reports). After a strong recent share price re-rating, PNI is trading on ~31.5x FY21 PE, which we acknowledge is elevated. However, we retain an Add recommendation taking a longer-term view on PNI’s growth potential.

    Key near-term risks include heightened market volatility and sustained investment underperformance from a key manager.

    Find out more

    Download full research note

    If you would like access or more information, please contact your adviser or nearest Morgans office. 

    Request a call  Find local branch

    Need access to our research?

    You are also welcome to start a two-week trial of our online platform, which provides access to detailed market analysis and insights, provided by our award-winning research team

    Create trial account 

    Disclaimer: Analyst may own stocks. The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

    • Print this page
    • Copy Link