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Magellan Financial Group FY20 Result - Strong Profit Result

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

Magellan Financial Group (ASX: MFG) is a fund manager that invests in global equities and global listed infrastructure. Magellan is one of the top-100 stocks by market value of the ASX. Magellan has a market capitalisation of A$11.4 billion.




What are the key results from Magellan’s FY20 report?

Magellan’s adjusted net profit after tax for FY20 is $438.3 million, up 20%. Average funds under management for FY20 is $95.5 billion, up 20%. Management and services fees revenue for FY20 is $591.6 million, up 25%. Magellan will pay a 6-month dividend of 122.0 cents per share (75% franked).

Magellan announced a several changes to their business operations in this report. Magellan will consolidate three global equity funds into a single trust with two-unit classes. This includes a Closed Class Units quoted on the ASX under and an Open Class Unit quoted on the ASX. This should simplify investment propositions while allowing investors greater flexibility in accessing Magellan’s flagship investment strategy.

Magellan notes that the company intends to undertake capital raising and bonus options in in Magellan Global Fund. This is comprised of $1-for-$4 offer to all Magellan Global Fund unitholders to subscribe for Closed Class Units and receive additional Closed Class Units worth 7.5% of subscription value in partnership with Magellan. Closed Class Units issued under the capital raising will also have an option attached; and separate bonus option issue to all Closed Class unitholders on 1-for-2 pro rata basis allowing option holders to subscribe for Closed Class Units at a 7.5% discount to NAV

Magellan will also launch a sustainable strategy and launch MFG Core series for retail investors by the end of 2020 calendar year. Magellan also intends to launch retirement income product soon.

MFG Core will consist of an MFG Core International Fund, MFG Core ESG Fund and an MFG Core Infrastructure Fund. MFG Core will be offered at a management fee of 0.5% per annum. This will provide investors a low-cost investment alternative for those wishing to gain exposure to Magellan’s investment strategy but are not necessarily seeking a full actively managed portfolio.

What is the outlook for Magellan?

The outlook for Magellan is positive, Magellan is building greater diversification for investors through their new funds and generating positive returns. Since inception to 30 June 2020, Magellan has generated investment returns of 10.9% per annum.

What is the market reaction to Magellan’s FY20 result?

The market reaction to Magellan’s FY20 result is positive. Magellan share price is up around 2% and is currently trading at A$62.86. This is a positive reaction as the Australian market is down around 0.35% today. Magellan is trading at a forward P/E ratio in the mid-twenties and has an annual dividend yield of around 3.2%.



This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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