City Of London Investment Share Discussion Threads

[gdcox] 09/10/2019 14:10

A flat 27 p div is a falling div in real terms. Of course 6%+ yield is much higher than gilts, but that is the comparison that a flat div requires.

[davebowler] 09/10/2019 12:38

Zeus;
Ahead of its AGM on 21 October, CLIG has released a 1Q trading update which reveals:

§ Funds under management (“FuM”) on 30 September 2019 of US$5.3bn (£4.3bn) compared to US$5.4bn (£4.3bn) on 30 June 2019, with negative market movements offset by good investment performance and net inflows.

§ US$140m net inflows in the 3-month period: $12m outflow from Emerging Market strategy funds; $10m inflow to Opportunistic Value strategy funds; and $142m inflow to Developed strategy funds.

§ Investment management performance was ahead of benchmark over the quarter: in Emerging Markets NAV performance was positive and discounts narrowed.

§ Group revenue continues to accrue at c. 75 basis points net of commissions and current run-rate operating profit was c. £1.6m.

§ 1Q post-tax profit was c. £2.4m (1Q19: £2.2m).

§ 18p per share final dividend, subject to approval at the AGM on 21 October, will be paid on 29 October.

Zeus View. CLIG’s US$140m of net flows and good relative performance are encouraging.

The month end FUM is as disclosed on the CLIG website. CLIG’s 1Q operating profit and PAT are consistent with previous guidance. We make no changes to our forecasts.

We note that:

§ CLIG’s Diversification strategies now contribute 24.0% of group FuM (30 June 2019: 21.7%).

§ CLIG’s Developed strategy FuM rose by 16.5% (or US$120m) in the 3 months to US$849m, in difficult markets, as it benefited from US$142m of net inflows.

§ The shareholder value created by diversification is becoming apparent.

Valuation: CLIG shares go ex 18p DPS on Thursday 10 October. With its strong balance sheet and 1Q reported PAT, investors should be confident in prospects of a 27p DPS this year. On a 6.0% yield, CLIG shares would trade at 450p.

[riverman77] 09/10/2019 08:36

I susepct clients are just switching out of the EM strategy into the DM strategies, which have lower fees. I don't think they're actually winning new clients, which is my main concern with this company,although it's a good solid performer.

[stun12] 09/10/2019 08:30

The net inflows in Developed look encouraging. One of the advantages of holding a piece of illiquid stuff like CLIG is that the price doesn't appear to move with the market. Or rather, the movement is hidden within the dealing spread.

I shall look forward to my dividend.

[masurenguy] 09/10/2019 08:03

FUM flat but Q1 post-tax profits up circa 9%.

City of London, announces that as at 30th September 2019, FuM were US$5.3 billion (£4.3 billion). This compares with US$5.4 billion (£4.3 billion) at the Company's year-end on 30th June 2019. Funds under Management excludes seed investments

IM Performance

IM performance was ahead of the benchmark over the quarter. Specifically, in the Emerging Market strategy NAV performances were positive and discounts narrowed marginally. In the Developed strategy relative returns were impacted by weak NAV performance from European and UK securities. In the Frontier strategy performance was negative due to exposure to Argentina. There were continued flows into the Developed and Opportunistic Value strategies totaling $152 million, while flows were negative in the Emerging strategy and neutral in the Frontier strategy.

Operations

The Group's income currently accrues at a weighted average rate of approximately 75 basis points of FuM, net of third party commissions. "Fixed" costs are c. £1.1m per month, and accordingly the current run-rate for operating profit, before profit-share of 30% and an estimated EIP charge of 5%, is approximately £1.6m per month based upon current FuM and a US$/£ exchange rate of US$1.23 to £1 as at 30th September 2019. The Group estimates that the post-tax profit for the first three months of the year will be approximately £2.4m (2018: £2.2m).

Dividends

The final dividend of 18p per share, subject to approval at the AGM on 21st October 2019, will be paid on the 29th October 2019, bringing the total dividend for the financial year 2018-19 to 40.5p, including the special dividend of 13.5p paid in March (2017-18: 27p special dividend : nil).

[masurenguy] 02/10/2019 11:02

Cannacord Genuity reduced their stake by 37% from 8% to 5% over the past few weeks. However, the shareprice has not fallen during this period so there were obviously some willing buyers available who were prepared to pick up the stock. If it was an existing institutional holder then we may see another RNS in due course reporting an increased position.

[nobbyx] 01/10/2019 19:21

Eggs, like topvest I hold shares in both CLIG and CTY. CLIG is one of my larger holdings so I don't want to put any more into it at present. CTY is just a handy place to stick spare cash in default of any more exciting option presenting itself. I neither feel 'better' nor 'worse' by holding one or the other or both.

My misunderstanding may have been that when you wrote you 'felt much better having 'your funds' in this one' it seemed as if you had to make a binary choice about having your funds in this company or in another.

There is no 'fuss' about CTY. It's just a widely-held investment trust. Plenty of press comment about it because there are plenty of hacks who write articles, indeed whole magazines about investment trusts.

CLIG is a small well-managed company working in a unexciting sector. Most companies attract press attention either because of their size or because something is going/has gone wrong. CLIG just gets on quietly and competently with its business and is thus of little interest to the press.

[topvest] 01/10/2019 18:23

I hold both so happy to have a conversation on either. They are both excellent.

[eggbaconandbubble] 01/10/2019 12:48

nobby, I'm quite aware of that. It was an observation that CTY which appears to my mind to be a very mediocre trust picks up press but CLIG remains off radar.

And 'No', I don't have all my eggs in one basket. I've also got plenty of bacon and lashings of bubble!!!

[topvest] 01/10/2019 10:03

A wonderful company this. 450p will be the next sell point for the founder.

[eggbaconandbubble] 01/10/2019 08:35

There have been several articles in the papers recently about CTY, which for obvious reasons catch my eye. But having looked at them I can't see what the fuss is all about and I feel much better having my funds in this one!

There never seems to be much in the press/media about CLIG

[gdcox] 25/9/2019 13:30

Measureguy, why are you repeat posting.

[masurenguy] 25/9/2019 12:40

Interesting interview with Brian Moretta, a financial analyst from Hardman, on the recent CLIG results.

[montyhedge] 25/9/2019 11:44

Surprised this not has not had a bid approach, from a big fund.

[skinny] 24/9/2019 12:36

15 month high @440p.

[gdcox] 18/9/2019 14:52

Well Hardman ( tks for the post) probably summarises it well by saying 'unless there is significant market disruption, more should follow in the next few years.'

[masurenguy] 18/9/2019 14:26

Another solid year
18 SEP 2019 / Corporate Research
By Dr Brian Moretta, Hardman & Co.

City of London has announced its results for FY2019. The headline figures of £11.4m PTP and undiluted EPS of 34.9p were in line with July’s trading statement, meaning the interest for investors was in the details. Although FUM ended the year up by more than 5%, at $5.39bn, average FUM for fee collection was slightly lower ($5.1bn in FY2019 compared with $5.2bn in FY2018). Combined with the ongoing decline in fee rates from the increase in the diversification areas, revenue declined almost 6% to $31.9m. Staff costs increased with the recruitment of the new REIT team, with offsets from reduced commissions and other administrative costs.

EM strategy: Market performance gave a slight boost to FUM, although the EM strategy outperformance was more significant. More detail on flows shows that EM is still attracting new funds, but rebalancing remains a hurdle to growing FUM in this area.

Cash: Cash conversion was, as usual, excellent, at 114% of earnings (boosted by working capital changes). Cash on the balance sheet declined due to REIT strategy seed funding, the special dividend and buybacks. At £13.8m, it is still more than adequate, and there remains scope for further return of capital.

Valuation: The 2020E P/E of 9.4x is at a significant discount to the peer group. The underlying 2020E yield of 6.6% 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. The valuation remains reasonable. FY2017 and FY2018 both saw dividend increases and, unless there is significant market disruption, more should follow in the next few years.

hxxps://www.citlon.com/investor-relations/investor-reports/HardmanCligReport7_19.pdf

[topvest] 16/9/2019 19:45

FY 20 will be 27p or 28p in my view.