Platinum Asset: Result 2012
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Platinum Asset Management’s net profit for 2012 was almost the same as it was in 2009—around $126m. But there’s one big difference in the funds management group’s results this time around.
In 2009, the company’s funds produced a blistering performance. The International Fund, for example, outperformed by an incredible 34%—see Platinum goes with the flows from 24 Aug 09 (Long Term Buy – $4.57).
Over the year to 30 June 2012, though, the International Fund went backwards by 6%, underperforming the MSCI World index by 6%. It has now underperformed over three years as well although, thanks to the strong performance back in 2009, it’s still well ahead over five years (for the time being).
| Full year to 30 June | 2012 | 2011 | Change (%) |
|---|---|---|---|
| Average FUM ($m) | 16,000 | 18,300 | -13 |
| Revenue ($m) | 227 | 267 | -14 |
| Net profit ($m) | 126 | 150 | -16 |
| EPS (cents) | 22.5 | 26.3 | -14 |
| DPS* (cents) | 21.0 | 25.0 | -16 |
| Franking (%) | 100 | 100 | |
| * Final dividend of 13.0 cents | |||
This deterioration in the fund’s performance, along with negative sentiment towards equities markets, is hurting. Outflows exceeded inflows in every month of the 2012 financial year, with net outflows totalling $1.7bn for the year. Negative performance and outflows produced average funds under management (FUM) of $16.0bn in 2012 (compared with $18.3bn in 2011).
Revenue fell 14% to $227m as a result. Net profit fell 16% to $126m, producing earnings per share of 22.5 cents. A fully franked final dividend of 13 cents was declared (ex date 21 August), making a total of 21 cents for the year.
The decline in year-end FUM to $14.9bn means 2013 profit is likely to fall, as we said on 11 Jul 12 (Hold – $3.69). While Platinum’s investment process and team is first-rate, unfortunately it’s not producing the goods at present. If the company cannot turn its fund performance around—particular if the International Fund begins underperforming over five years—there’s a risk outflows will accelerate.
It’s impossible to know when—or even if—Platinum’s investment performance will turn around. But this difficult period will do nothing to help the company attract inflows, which is why we’re not interested in the stock at current prices. The share price is almost unchanged since 11 Jul 12 (Hold – $3.69) and remains a HOLD.
The model Growth and Income portfolios own shares in Platinum Asset Management.
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