Financial stocks under investors radar – MFG, ECX, PPT

There has been a lot of volatility in the global financial sector stemming from the ongoing Sino-US trade war, the rate cuts announced by Reserve Bank of Australia (RBA) in past two consecutive meetings and the uncertain political scenario across the global landscape. In the July Monetary Policy Meeting, RBA announced a rate cut of 25 basis points to 1% followed by the previous cut of 25 basis points as announced in June Meeting. The rate cuts are to have the direct impact on Australian financial sector.

Despite the uncertainty and unfavourable environment in financial industry, some Australian companies continue to hold investors’ attention. Let’s have a look over the three important stocks of Australian financial industry.

 Magellan Financial Group Limited (ASX: MFG)

Publicly Listed in 2004, Magellan is a financial sector company, focused on investing in high-quality global stocks. The company houses a team of investment professionals’ expert who manage over $86 billion in global equities as well as the infrastructure strategies for international clients.

Stock Performance

The stock trading near to its 52-week high surged up 2.564% to end the week at $58.00 on 19 July 2019. MFG’s price to earnings multiple stood at 29.890x with a market capitalisation of $10.01 billion.

Over the past 12 months, Magellan’s stock price has jumped up 127.38% including a positive price change of 38.67% in the past three months.

Recent Update

Magellan recently announced the change in the terms of the Executive Employment Agreement with Chief Executive Officer Dr Brett Cairns.

Under the modified terms of contract, Dr Brett Cairns is reportedly entitled to receive an increased base salary of $1,545,000 annually, with effect from 1 July 2019. MFG further agreed to increase fixed remuneration by 3% each year in addition to the variable remuneration of up to 50% of fixed remuneration based on performance metrics.

The company informed that four performance metrics for the year ended 30 June 2020 are: Delivery of Key Strategic Projects; Leadership, People and Culture; Compliance, Governance and Cybersecurity; and Operational Effectiveness.

Funds Under Management

In the most recent update on Funds Under Management (FUM), Magellan reported total FUM of A$86,718 million for the month ended 30 June 2019 compared to A$82,759 million for the month ended 31 May 2019.

MFG’s June total FUM consists of A$23,216 million of retail component and A$63,502 million of institutional component, which together led to the net inflow of A$488 million during the month. This is in comparison to A$21,973 million and A$60,786 million in retail and institutional sectors, respectively, at 31 May 2019.

The company further announced that it will pay the distribution of ~$604 million in July which will be reflected in the figure of Funds Under Management’s (FUM) next month announcement. The report read that Magellan is entitled to estimated performance fees of ~$83 million for the year ended 30 June 2019.

Its Average FUM for the 12 months ended 30 June 2019 stood at $75.8 billion in comparison to $59.0 billion for the 12 months ended 30 June 2018.

Also Read: How is Magellan Financial Group performing in 2019

Eclipx Group Limited (ASX: ECX)

Eclipx Group Limited is an ASX-listed financials sector company with businesses in fleet management, vehicle fleet leasing and other diversified services in financial industry across New Zealand and Australia.

Sale of GraysOnline and AreYouSelling

The company recently announced the sale of its two brands GraysOnline and AreYouSelling- to Quadrant Private Equity for the consideration of $60 million. Eclipx stated that the Enterprise Value of A$60 million represents an EV/EBITDA of 7.5x with reference to the combined rolling 12 months EBITDA to March 2019.

Moreover, the transaction includes a distribution arrangement allowing Eclipx to continue to benefit from the utilisation of Grays Auto as one of its channels for the disposal of end of lease vehicles.

Eclipx intends to use the net proceeds of the sale to the reduction of its corporate debt facilities in line with its 1H19 results release. This divestment further outlines the company’s simplification program and strategic refocus on its core fleet leasing and novated businesses.

The report further disclosed a transitional services arrangement and is expected to result in temporary annualised costs to Eclipx of ~A$1.6 for the period of transition up to 30 September 2020. As per the company’s information, the sale will result in an accounting non-cash loss of ~A$100 million, which has to reportedly be recognised in the 2H19 accounts.

The transaction is expected to complete on 31 July 2019 and remains subject to a limited number of conditions including FIRB approval.

Appointment of Acting Chief Financial Officer

On 5 July 2019, Eclipx announced the appointment of acting Chief Financial Officer (CFO) Jason Muhs, former Head of Business Strategy and Investor Relations. The appointment has been made on the retirement of former Chief Financial Officer (CFO) Garry McLennan.

Eclipx CEO Julian Russell stated that “Together with other members of the leadership team, Jason has been instrumental in the development and ongoing execution of the simplification program.”

Further, Eclipx Chairman Kerry Roxburgh said: “On behalf of the Directors and from us all at Eclipx, I recognise Garry’s service over the past five years. He implemented several initiatives which facilitated growth in our core fleet leasing and novated businesses and wish him well in his retirement.”

Stock Performance

ECX stock price edged up by 2.685% to close at $1.530 on 19 July 2019. Over the past 12 months, the share price has lost 48.87% despite a massive upside of 78.09% recorded in the past three months.

The market capitalisation of the company sits at $1.78 billion with 46.57 million shares as at 19 July 2019.

Also Read: Is Eclipx still a likable stock?

Perpetual Limited (ASX: PPT)

Perpetual is a diversified financial services company that operates business through its three segments that include Perpetual Private, Perpetual Investments and Perpetual Corporate Trust.

On 15 July 2019, Perpetual announced Perpetual Investments’ funds under management (FUM) as at 30 June 2019 of $27.1 billion, a reduction of $0.3 billion on the previous quarter. Net outflows for the quarter were reported to $1.1 billion, that took the total average FUM for the three months to 30 June 2019 to $27.4 billion.

Perpetual Limited FUM and flows by channel (Source: Company Announcement)

In the report, the company attributed the decline of $0.3 billion in FUM over the quarter to:

  • $1.1 billion of net outflows comprising:
  • $1.2 billion of net outflows from Australian Equities primarily from Institutional and Intermediary Channels;
  • $0.1 billion of net outflows from Global Equities primarily from Institutional and Intermediary Channels;
  • $0.2 billion of net inflows to Cash and Fixed Income. This includes approximately $0.4 billion capital raising for Perpetual Credit Income Trust (ASX: PCI)
  • Market appreciation of $1.1 billion; and
  • A distribution payment to clients (net of automatic re-investments) of $0.3 billion

PPT stock price declined by 1.283% to close at $37.700 as at 19 July 2019. The price to earnings multiple of the company was 13.290x with a market capitalisation of $1.78 billion.

Over the past 12 months, the stock has declined by 13.05% including a negative price change of 6.69% in the past three months.


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