City Of London Investment Share Discussion Threads

[davebowler] 30/4/2020 12:26

Update to Zeus forecast
Recent news: On 21 April CLIG’s 3Q trading update to 31 March 2020, revealed:

§ 27% fall in Funds Under Management (“FUM”) from US$6.0bn to US$4.4bn

­ with weaker Sterling, FUM in £ fell 20% from £4.5bn to £3.6bn.

§ In 3Q, while Diversification CEF strategies (Opportunistic Value and Developed funds) had net inflows of US$25m, the Group’s Emerging Market Funds had net outflows US$68m

§ The Group has an active pipeline across all its major CEF offerings with increased interest in the Diversification CEF strategies

§ Post COVID-19, income to FuM remains unchanged at c. 75 bps of FuM

Financial markets have been volatile: On 20 January 2020 the MXEF index hit a 52-week high of 1151, by 20 March 2020 MXEF had fallen 28% to a low of 752. From 20 March to 31 March 2020 the MXEF index had recovered 10% to 827.

In April 2020 the MXEF index has risen 12.6% to 931.

Changes to Zeus forecast: Using MXEF of 888 and with consequentially lower market values for FUM, we cut our P&L forecasts but maintain our DPS forecasts:

§ Trim our FY(Jun)20E revenue by 2.4% to £32.0m;

§ Cut our FY(Jun)20E adj PBT by 15.9% or £2.0m to £10.6m;

§ Cut our FY(Jun)20E adj diluted EPS forecast by 16.2% to 32.5p

These changes to our FY(Jun)20E forecast reflects the strong 1H20 results (published in February 2020 and are set out in Exhibits 4, 5, 6 & 7), the performance in 3Q and an assumption that markets fall back to 888.

We leave our DPS forecasts unchanged as on 31 December 2019, as the Group had no bank debt, £12.5m of cash at bank, and an operating model which remains cash generative.

On our forecasts we expect the 28p dividend to be covered by cash EPS.

Valuation: On our rebased forecasts, at 316p CLIG shares trades on 9.7x our new forecast for FY20E diluted EPS and offer investors an 8.9% dividend yield on our forecasts based on MXEF index of 888.

[stun12] 29/4/2020 18:01

Picked up a few at 322p having got out at various prices on the way down. There was an unusually small dealing spread, so there must be some paper around for a change.

Probably too early, but the bounce from the low has been somewhat muted so far.

[masurenguy] 26/4/2020 13:39

Major shareholders as at Friday's close updated in the header. Since the beginning of this year two shareholders have reduced their position - Barry Olliff from 7.6% to 7.0% (pre-programmed) and Polar Capital from 3.7% to 2.99% - and one (APQ Global) has increased their stake from 5.5% to 6.2%.

[masurenguy] 24/4/2020 07:50

Some comments from the Henderson Far East Income report which also have relevance to the future prospects for CLIG !

"The impact on corporate earnings will be significant and although a consensus of analysts is still expecting Asian earnings to grow in 2020 this forecast is constantly being revised lower. The outlook for dividends is expected to be more resilient. Asian corporates are in a much heathier state than they were in 2008. Balance sheets are strong, cash flow generation is high, debt is low and the large gap between earnings per share and dividend per share allows some flexibility with dividends if/when earnings come under pressure........It is difficult to predict how long the impact from the virus will last but there are some things we are pretty convinced about. First and foremost, interest rates will go lower and remain low for some considerable time. With ageing populations and interest rates at record lows the demand for income will remain considerable while the attractiveness of equities looks increasingly appealing compared to bonds and cash. We are positive on the outlook for Asia in the years ahead but fully expect volatility to continue in the short term. Although the virus appears to be past the worst in Asia, the rest of the world and especially the US are still in the escalation phase which will ensure things get worse before they get better."

[montyhedge] 23/4/2020 09:18

Seems Polar are really forced sellers, with redemptions.

[robsy2] 23/4/2020 06:35

Indeed..We all benefit from you keeping an eye on things and sharing so thanks masureguy.

[nobbyx] 22/4/2020 16:32

Thanks for this interesting information, Masurenguy.

[masurenguy] 22/4/2020 14:55

Polar Capital have recently reduced their position here by selling just under 194K shares. They also have reduced/eliminated their positions in some other stocks that I own in order to fund investor redemption's. Their recent disposal has reduced their holding to 794.2K or 2.99%. They are now below the reporting threshold and may seek to reduce or even liquidate their residual holding here. This may presage some further weakness in the shareprice until they complete their disposal target here.

[masurenguy] 22/4/2020 14:33

Handling challenging markets well
22 April 2020
Hardman & Co: Dr Brian Moretta

City of London has announced a trading update for 3Q’20. Market conditions have been challenging for fund managers. With a largely institutional investor base, there has been a mixture of subscriptions and withdrawals, with net withdrawals in the quarter of $35m. Falling markets weighed more heavily on FUM and, at the end of March, total FUM were $4.40bn, down from $6.01bn three months earlier. We do note that markets have recovered somewhat so far in April, suggesting current FUM will have clawed some of that back. No decision has been taken on the dividend, but near-term increases look unlikely.

Operations: The revenue margin is holding steady at 75bps. There is no direct news on costs, with City of London’s financial strength and desire for stability allowing it to prioritise keeping its team in place. Operationally, it has executed its business continuity plan, and all staff are working remotely.

Performance: All of the strategies underperformed over the quarter, particularly in March. Widening discounts were the main cause, perhaps aggravated by liquidity issues, although NAV underperformance also contributed. There has been some narrowing of discounts in April.

Valuation: The 2020E P/E of 8.9x is at a discount to the peer group. The underlying 2020E yield of 8.6% is attractive, in our view, and should, at the very least, provide support for the shares in the current markets.

Risks: Although emerging markets can be volatile, City of London has proved to be more robust than some other EM fund managers, aided by its good performance and strong client servicing. Further EM volatility could raise the risk of such outflows, although increasing diversification is also mitigating this.

Investment summary: Having shown robust performance in challenging market conditions, City of London is now reaping the benefits in a more supportive environment. Valuation remains reasonable. FY’17 and FY’18 both saw dividend increases. While dividend increases may be unlikely amid the current volatility, we believe the company can keep the dividend steady in current market conditions.

[cockerhoop] 21/4/2020 09:34

frazboy,

The company website, it's updated pretty promptly after each month end.

[robsy2] 21/4/2020 09:28

A carefully worded statement from CLIG. Nothing is certain but the share price is firm.Barry wants his divi as does everyone else and they definitely have the cash to pay it. Fingers crossed.

[masurenguy] 21/4/2020 09:22

I think there is little doubt that they will pay a dividend of some kind but of course the timing and prospective amount remains to be seen. The last time FUM was circa $4.4m was at the end of Q1 in September 2016. The dividend in that year - ending June 2017 - was 25p, which was a marginal 4% increase over the prior year ending June 2016. If - which is a purely speculative assumption - the dividend reverted to that level, the yield would still be circa 7.4% on the current Offer price of 339p !

[skinny] 21/4/2020 08:16

The clue is in the last sentence and in the opening price!

[montyhedge] 21/4/2020 08:00

I'm sure they will pay a dividend even if reduced. They know the importance of a dividend for shareholders.

[skinny] 21/4/2020 07:57

.



Operations

Due to the COVID-19 pandemic, our business continuity plan was enabled with all staff working remotely via audio and secure video communication and full network connectivity to all critical systems with security protocols in place to protect client data.

The Group's income remains accrued at a weighted average rate of approximately 75 basis points of FuM, net of third party commissions and has not changed as a consequence of the COVID-19 outbreak.

Dividend

In recognition of the challenges posed by the COVID-19 pandemic, the Board continues to monitor closely the Group's financial position. Shareholders will be aware that your Board has always ensured the Company maintain a strong balance sheet with significant cash reserves and zero debt as we believe this policy provides a vital financial cushion to weather unforeseen events and market volatility such as that presented by COVID-19. Since it is impossible to know the duration of the current dislocation to economies and stock markets, it would be imprudent at this stage to make any statement regarding the final dividend in respect of the year to 30 June 2020. However, your Board is cognisant of the importance of dividends to our shareholders and will review the position after the year-end.

[robsy2] 03/4/2020 13:52

Thanks
Not a huge setback , so far...
who knows what may come..

[cockerhoop] 03/4/2020 13:22

Robsy,

FUM $4.402bn at the end of March.

[robsy2] 27/3/2020 16:20

Thanks
So more or less 4.5b USD.I've bought some more yesterday and today for me and family menbers, the spread is 3% ...and you soon move the market up so it is definitely a buy and hold stock.

[cockerhoop] 26/3/2020 18:14

Robsy,

FUM was $5.315bn at the end of Feb, index has fallen approx 16% since then so i'd estimate FUM now around $4.45bn.

[skinny] 25/3/2020 09:44

Its quite surreal, looking back to posts from @14th January, when we were discussing the all time high etc!

[montyhedge] 25/3/2020 08:55

His a troll.