# City of London Investment Group: Confirming an excellent first half

- Link: https://www.directorstalkinterviews.com/city-of-london-investment-group-confirming-an-excellent-first-half/4121054540
- Published: 2022-02-24T07:44:07+00:00
- Author: Amilia Stone

**City of London Investment Group plc** (LON:CLIG) has announced its interim results
for 1H’22. Having announced a special dividend of 13.5p in its January trading statement,
the main interest was in the details. Breaking down net inflows into gross inflow
and outflows showed that 2Q was a distinct improvement over 1Q. City of London believes
that, once the pandemic restrictions relax, a return to in-person meetings will 
improve its ability to market its products. Financially, we note that the cash conversion
of profits remains excellent, at 87% of underlying earnings, underpinning its strong
dividend- paying capability.

 * **Operations:** The IT integration after the Karpus transaction is continuing
   and is expected to be finished before the end of the financial year. After a 
   decline in the importance of the Middle East in equity market indices, City of
   London Investment Group is closing its Dubai office – with some small cost savings.
 * **Estimates:** We have increased our estimates of the net inflows into the new
   strategies and outflows from existing strategies, pushing down fee margins. Our
   2022E underlying EPS has fallen 3%, to 47.3p, while our 2023E underlying EPS 
   is down 4%, to 50.0p. Our new 2024E EPS is 53.1p, with an estimated dividend 
   of 39p.
 * **Valuation:** Despite the recent good performance, the 2023E P/E of 12.7x remains
   at a discount to the peer group. The 2023E yield of 6.8% is attractive, in our
   view, and should, at the very least, provide support for the shares in the current
   markets.
 * **Risks:** Although City of London Investment Group has reduced its relative 
   emerging markets exposure, it is still 43% of assets. It has proved to be more
   robust than some other fund managers, aided by its good performance and strong
   client servicing. Market volatility remains a risk, although increasing diversification
   is also mitigating this.
 * **Investment summary:** Having maintained good investment performance and operational
   control, City of London is well-placed to grow organically. We believe the valuation
   remains reasonable. After special dividends in FY’19 and FY’22, dividend increases
   in FY’20 and FY’21, and with the EPS boost from Karpus, the prospects for future
   dividend increases look very good.

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