Avior Capital Markets - Coronation Fund Managers Limited (12AS) Coronation | Rediscovering alpha

Report

Avior Capital Markets

David Talpert

Coronation | Rediscovering alpha

Coronation Fund Managers (CML) had impressive Q1 CY '19 investment performance as most mandates outperformed their benchmarks. Improved investment performance supports a slowdown in net outflows and our fair value for the Group. We estimate AUM at Mar '19 of R589bn (+7.1% from Dec â€˜18), based on quarterly net outflows of R5.7bn and investment returns of 8.2% (JSE SWIX +6%). However, we expect H1 FY â€˜19 average AUM of R578bn to be 1.8% lower than closing AUM.

10/04/2019 14 EN

Underlying

Coronation Fund Managers Limited

Coronation Fund Managers is a third-party fund management companies. Co. is organized into three key segments: institutional, which manages institutional assets in South Africa in both segregated and pooled mandates; retail, which provides a range of funds distributed through the non-affiliated channels of independent financial advisors and linked investment service providers; and international, which is being managed from Cape Town and London. Co.'s customers include retirement funds, medical schemes and multi-manager companies in South Africa, banking and insurance groups, investment advisory businesses, independent financial advisors, individuals and direct unit trust accounts.

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ZAE000047353 Johannesburg Stock Exchange South Africa

Provider

Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

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Analysts

David Talpert

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Avior Financials | Coronation | Peregrine | Repo rate cut | Investment Banking statistics

Coronation's Dec '19 institutional factsheets highlight impressive 2019 investment returns. We estimate Group Q1 FY â€˜20f net outflows of R17.8bn and Dec '19 AUM to remain flat at R577bn. Peregrine's hedge funds generated strong returns in FY '19. We expect PGR to report improved performance fees in H2 â€˜20f. > Due to heightened credit risk in the SA economy, SA Repo rate cuts are positive for SA banks' earnings growth prospects in our view (as lower impairment charges and higher advances growth offset lower NIMs). Our top picks in the sector are Standard Bank and ABSA. Standard Bank ...

January 21, 2020 January 21, 2020 11 EN

Avior Capital Markets

Coronation | A slow improvement in net flows

Coronation Fund Managers (CML) reported an 18% decline in FY '19 headline earnings. Net outflows of R44bn is ahead of the five-year average of R38bn. We expect FY '20f earnings to recover (8.3% y/y growth) as net fee margins improve. We forecast AUM growth at a 3% CAGR over the next three years. In our view, the investment case depends on CML's ability to generate sufficient alpha to stem the outflows. We believe the outflows will continue unless there is consistent alpha generation or net growth in the SA savings pool.

January 8, 2020 January 8, 2020 12 EN

Avior Capital Markets

Coronation | At the mercy of the markets

We expect Coronation Fund Managers (CML) to report a 22% decline in FY '19 HEPS. CML's AUM has remained flat over the past five years due to muted equity returns and over R180bn in cumulative net outflows. In H2 '19, we expect net outflows of R21bn. Due to CML's high market share, we believe there are limited growth opportunities in SA. We therefore expect CML's AUM to increase in line with market returns. Due to our expectation of continued net outflows, we estimate an AUM CAGR of 3% over the next three years. We remain cautious on CML's outlook and believe there is limited upside given...

October 4, 2019 October 4, 2019 13 EN

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February 7, 2020 February 7, 2020 15 EN

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January 28, 2020 January 28, 2020 36 EN

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Coronation | Rediscovering alpha

Avior Financials | Coronation | Peregrine | Repo rate cut | Investment Banking statistics

Coronation | A slow improvement in net flows

Coronation | At the mercy of the markets

Tiger Brands | ESG | Pressed to execute

SA Investment Strategy | Review of January 2020 for SA investors: Coronavirus weighs on the ZAR

SA Banks | Low credit risk in commercial property | Time to buy SA banks

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