Has Platinum Asset Management Lost Its Touch?

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This story features PLATINUM ASSET MANAGEMENT LIMITED.
For more info SHARE ANALYSIS: PTM

By Chris Shaw

Despite a stellar reputation as a fund manager Platinum Asset Management ((PTM)) has not enjoyed the greatest of histories as a listed company, as following frantic initial buying when the shares listed a few months ago the stock has dropped from highs of more than $9.00 to closer to $6.00.

While this brings the stock more in line with what most brokers consider as fair value it has done little to create any excitement, a trend unlikely to be shaken by what was generally regarded as a poor September update.

The company announced a 3% fall in assets under management to $21.1 billion, Credit Suisse noting this occurred at the same time as the MSCI (Morgan Stanley Capital International) world index rose 3%. Much of the decline in assets is the result of the loss of an institutional mandate, which took $131 million out of the company’s hands, management indicating a further $487 million may also be removed by the same client this month.

So have Platinum’s stock pickers lost their golden touch? No, says Credit Suisse, but there is little doubt in the broker’s view the focus on value-style investing is hurting in the current market environment.

As a result the broker rates the stock as Neutral, suggesting it is fair value at current levels following downward revisions to earnings forecasts of 6-8% in coming years that leave its earnings per share (EPS) forecasts at 33c this year and 36c in FY09.

ABN Amro, which is forecasting EPS of 34.9c and 38.6c respectively in FY08 and FY09 also doesn’t see the group as having lost its touch and points out performance has actually improved slightly in recent months, as evidenced by its International Fund outperforming the MSCI for September.

The broker continues to rate the stock as a Buy, noting while the current loss of mandates will impact on earnings (its estimates have been trimmed 2-4%) the company remains well positioned in the international equities space and so should be able to grow funds under management over the course of FY08.

Merrill Lynch is the only other major broker to cover the stock according to the FNArena database and rates it as Neutral, seeing little potential upside given recent poor performance against local benchmarks.

The key remains growing assets under management and the broker doesn’t see signs of this shorter-term as retail money is likely to move in search of higher returns given current strong equity markets.

Aspect Huntley also rates the stock as a Hold, though it has not commented on the outlook since the company reported earnings in August.

The FNArena database shows an average price target of $7.18, which is down from $7.50 prior to the September update. Shares in Platinum Asset Management today are weaker despite the market posting a modest gain and at 12.20pm were down 17c or 2.7% at $6.06.

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