Platinum Asset Management

Platinum Asset Management’s interim result was as expected in Platinum lashed by dismal market from 14 Feb 12 (Hold – $3.65). Revenue fell 15% to $115m while profit declined 14% to $67m. From earnings per share of 12.0 cents, a fully franked 8 cent dividend was declared (estimated ex date 21 Feb).

At the results presentation, managing Kerr Neilson was contrite about the poor performance of the International Fund in calendar 2011. Over a five-year period, though, the Fund has produced a superior performance to virtually all of its peers (with, it must be admitted, a -0.8% annualised return).

Pleasingly, Neilson indicated it was business as usual; shareholders should not expect any risky changes to the long-standing investment approach. He attributed the poor short-term performance to a relatively low contribution from shorts, weakness in the Fund’s cyclical stocks, and errors of timing. He reiterated that, while the macroeconomic outlook is poor, stock valuations are very attractive.

As expected, fund flows were weak during the half, with a net $808m being withdrawn. Add to that negative investment performance of $1,864m in the half, and it’s why Platinum’s funds under management declined 15% over the half.

While Platinum is Australia’s highest quality funds management business, our thoughts from 14 Feb 12 remain unchanged. This is a great business but the price isn’t sufficiently attractive given the industry headwinds. The stock remains a HOLD for up to 5% of your portfolio. 

Note: The Growth and Income portfolios own shares in Platinum.