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Why Is Perpetual Down 2.75% Today?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Perpetual Limited (ASX: PPT) sold off almost 3% this morning, following the release of their FY19 results. Revenue declined 4% this year which, alongside an increase in expenses, drove profits down 17% on the previous year. The company made a full year net profit of $115.9m, which came alongside a modest dividend cut. The revenue change was impacted by some net outflows in their investments division, in addition to lower performance fees. Growth in data services revenue helped offset the decline in Perpetual Investments which occurred on the back of lower management and performance fees.

Perpetual - Down today
Perpetual continued to suffer this year, as growth outperforms value across global markets (Credit: Perpetual)

Perpetual did however announce slightly more upbeat guidance for FY20, as the management believes that a lot of their investments in improving the business will pay off. The company is launching a professional services model, in addition to adding 11 advisors in the first half of FY20, under their Perpetual Private brand. This will help the company to grow over FY20 and would complement Perpetual’s strong pipeline of M&A opportunities. The company also has an existing strategy around digital, which it aims to expand over the coming few months.

The stock trades on a PE of 12.15 which is lower than the index, implying the market is not pricing high expectations into the company’s stock. This gives an investor a margin of safety under a slightly negative scenario where growth remains low but positive and recent initiatives don’t achieve as much growth as expected. They also aim to add new investment opportunities and develop a stronger global market focus, which has become increasingly attractive to Australian investors. This is because US markets have consistently outpaced ours since the GFC. The company is also introducing a cost reduction initiative, which is expected to deliver $18-23m in annualised cost savings once fully implemented.

 


 

Disclaimer:

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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