What’s new. City of London Investment Group (LON:CLIG) audited accounts released this morning are in line with its pre-close statement for the year to 30 June 2018, released on 17 July, which revealed strong growth, despite the recent fall in market values. In summary:
10% rise in Group Funds under Management to US$5.1bn (£3.9bn), with Emerging Market products contributing 82% and diversification products (i.e. Developed Market, Opportunistic Value and Frontier products) 18%.
Revenues rose 8.3% to £33.9m (FY(June)17: £31.1m): this is above our forecast (Zeus forecast was £33.5m; our previous estimate was £34.0m)
10.3% rise in PBT to £12.8m (as indicated in the pre-close update), with a 22% tax charge 11.0% rise in PAT to £10.1m (as indicated in the pre-close update).
7.1% rise in fully diluted EPS to 39.3p (as indicated in the pre-close update) and 8.0% rise in Full Year DPS to 27p (precisely in line with Zeus forecast).
Net cash was £19.7m which is 9.4% above Zeus expectations: (Zeus forecast was £18.0m; previously estimate was £18.8m).
The Chairman’s outlook is sanguine: “Emerging Markets … are currently out of favour [while CLIG’s] diversified products are largely focused on Developed markets, including the US which is enjoying the Trump stimulus … shareholders [can] decide whether to sell EMs and buy into Developed markets or do the reverse.”
Zeus view. In rising markets CLIG delivered FuM, revenue, EPS and DPS growth. The recent fall in emerging markets has depressed profits and EPS. We are impressed by the success of CLIG’s diversification products, where the relative performance has been positive and $400m of net inflows have increased FUM to $900m (up 95% on 30 June 2017: $461m).
We leave our forecasts, which were adjusted in July 2018, unchanged.
Valuation. City of London investment Group shares at 410p are cum 18.0p final DPS (4.4% yield on the final DPS alone). CLIG shares goes “ex” on Thursday 11 October. CLIG’s investment process and growing non-Emerging-Market capability supports expectations of continued growth even in flat markets. Compared to market PER of 12.8x for Emerging Markets and 11.2x for the FT All Share, CLIG PER of 10.1x is very attractive. Its forward dividend yield of 6.8% is a clear indication of value