MFG – UBS rates the stock as Sell

FY19 net profit was well ahead of UBS estimates which purely reflected one-off unrealised asset gains. Otherwise, funds management profit was in line. Of more interest to the broker was the $270m equity raising announcement to fund future growth initiatives.

While deploying capital to fund investor discounts for closed-end funds makes strategic sense, the increasing capital intensity of flows is an indication to the broker the company is entering a more mature growth phase.

Partnership costs are becoming more of a recurring feature and, hence, the broker envisages downside risks to value. Sell rating maintained. Target rises to $45.00 from $43.35.

Sector: Diversified Financials.

Target price is $45.00.Current Price is $60.75. Difference: ($15.75) – (brackets indicate current price is over target). If MFG meets the UBS target it will return approximately -35% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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