Navigator Global gets hit by increased volatility and the downturn in global assets markets over the December 2018 quarter. Management fee revenue for the FY19 H2 is likely to fell 10% driven by the significant reduction in AUM over the last fiscal quarter.
On Wednesday, the company cautioned its investors on the significant reduction in its Assets Under Management, due to be released in the week starting 14 January 2019. The downturn is claimed to be associated with the meltdown in global assets market that could even impact the company’s future financial performance.
Navigator Global Investments Limited (ASX: NGI) told that for the December 2018 quarter, MSCI World had measured a decline of 12.7% in global equity market while US High Yield was down 4.4%. Whereas on the front of Hedge fund performance, HFRX Global was down 8.6% and HFRX Equity Hedge Indices was down by 5.6%.
These negative market trends took the company’s diversified strategy down by approximately 3.7% while its Global Long Short strategy was down ~8.5%. As a result, there is reported to be a significant negative impact on the company’s Assets Under Management.
Well, the meltdown didn’t come as a surprise to the company! At the November’s Annual General Meeting, the group had already stated its anticipation of encountering the market volatility in December 2018 quarter. But in the process of finalizing its investment performance and Assets Under Management (AUM) for the December 2018 quarter, the company realized that its actual inflows have been slower than expected.
In clarification of its reduced AUM performance, Navigator explained three significant factors affecting the Group’s AUM for the quarter ended 31 December 2018. It said a decline in AUM is directly attributable to lower than expected investment performance. The second factor outlined the faster than expected redemption cycle from few MAS assets transition. Whereas, an elongated sales cycle on new business opportunities were explained as the last and third factor.
Besides facing a contraction in AUM, the company confirmed to have no material impact on the Group’s Earnings Before Interest tax, Depreciation and Amortization (EBITDA) for the six months to December 2018. Moreover, the company foresees to achieve an EBITDA of approximately US$20 million for the first half of Fiscal 2019.
But coming to the second half of Fiscal 2019, the group anticipates its EBITDA to decline by 20% compared to H1 FY19. The reason for the same has been reported to be the cumulative effect of reduction in AUM which is likely to result in a management fee revenue decline. The company expects its management fee revenue for FY19 H2 to see a drop of ~10% compared to FY19 H1 while performance fee revenue for Fiscal 2019 is likely to remain nominal.
On this to-be-alert update, the investors pressed the sell button for Navigator Global’s stock on ASX. The stock price fell massively by 27.553% to last trade at $3.050 on 9 January 2019. However, in the past 12 months, NGI stock performance has been on the positive side of the picture with +26.81% daily price change.
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