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).