Perpetual: Good signs of momentum
About the author:
- Author name:
- By Richard Coles
- Job title:
- Senior Analyst
- Date posted:
- 23 October 2021, 10:30 AM
- Sectors Covered:
- Insurance, Diversified Financials
- Perpetual (ASX: PPT) has released its 1Q22 business update.
- Overall, we saw this as a solid quarter for PPT highlighted by; 3% Perpetual Asset Management (PAM) AUM growth, a return to positive PAM inflows (+A$0.1bn) and 5%-9% FUA growth in Corporate Trust and Perpetual Private respectively.
- We upgrade our PPT FY22F/FY23F earnings by 2%/4% on higher FUM forecasts, offset to a degree by increased expense growth guidance. Our price target rises to (login to view).
- We think successful execution of PPT’s growth strategy could drive significant upside and we see PPT’s current valuation as relatively undemanding (~16x FY22F PE). ADD.
Perpetual (ASX: PPT) has released its 1Q22 business update. The key takeaways were;
- Perpetual Asset Managements (PAM) total AUM reached A$101bn, up 2.7% on pcp, with PAM net inflows of +A$0.1bn;
- net flows were split +0.2bn in Perpetual Asset Management Australia (PAMA) and -A$0.1bn in Perpetual Asset Management International (PAMI); and
- Perpetual Corporate Trust FUA (A$965bn) was up 5% on pcp, while Perpetual Private FUA (A$18.5bn) rose 9% on pcp.
PPT noted as a result of the Laminar acquisition, excluding PAMI, expense growth guidance has increased from 2%-4% to 3%-5%. The Laminar Capital acquisition is expected to be earnings accretive on an underlying basis in FY22.
Overall we saw this as a positive quarterly performance for PPT, and make the following key observations:
While PPT only delivered mildly positive PAM fund flows (+A$0.1bn), these represented a strong improvement on the sequential quarter (-A$2.3bn).
The trend line in PAMA flows in the last 4 quarters is very encouraging (-A$2.7bn, -A$0.3bn, A$0bn, +A$0.2bn) and should be further assisted by another apparent strong quarterly investment performance against benchmarks and forthcoming new ETF products. We also remind PPT was recently named Zenith fund manager of the year.
While PAMI remains in outflow (-A$0.1bn), the result was an improvement on the sequential quarter (-A$2.4bn), with management noting outflows were driven mainly by US equities/fixed income, with inflows occurring into higher margin global equities strategies (+A$1.5bn).
Trillium continues to see good momentum with +A$261m in 1Q22 inflows and AUM of A$8.3bn, up +48% since the acquisition. Barrow Hanley saw +A$0.5bn of inflows into its equity strategies in 1Q22.
PCT and PP saw sequential FUA growth of 5%-9% respectively, which represents a good outcome in our view.
Forecast and valuation update
We upgrade our PPT FY22F/FY23F EPS by 2%/4% on higher FUM forecasts, offset to a degree by increased expense growth guidance.
Our price target rises to (login to view).
We think the recent Barrow Hanley/Trillium acquisitions have put the foundations in place for PPT to build out a strong global investment management platform. Successful execution here will drive share price upside, in our view, and with Rob Adams investors are backing a CEO with a proven track record in this area.
Trading on ~16x FY22F PE, we see still PPT’s valuation as undemanding. ADD.
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