CIO, Market Matters<\/em><\/p>\n Right now, ASX listed investment fund Perpetual (ASX:PPT)<\/a> looms as a classic case of re-evaluating a stock on the basis that the sum of its parts might be greater than the whole.<\/p>\n It\u2019s an idea Perpetual itself canvassed and outlined to shareholders on Dec 6, noting its \u201cgrowth strategy had provided Perpetual with three quality businesses of scale\u201d.<\/p>\n Further evaluation showed \u201cadditional value\u201d could be unlocked (for shareholders, of course) by separating Perpetual\u2019s Corporate Trust and Management businesses, and \u201ccreating a more focussed Asset Management business\u201d.<\/p>\n Major shareholder Washington H. Soul Pattinson (ASX:SOL) liked the idea so much it wanted to buy the company.<\/p>\n PPT\u2019s next announcement to the ASX was a note to say WHSP had proposed buying 100% of issued ordinary shares in PPT \u2013 \u201cconditional upon a demerger of Perpetual\u2019s Asset Management business\u201d.<\/p>\n The Soul Patts offer values Perpetual at $27 a share (circa +28.5% premium) to PPT\u2019s November 13 closing price of $21. Tellingly, Perpetual has decided that offer to be \u201cnot in the best interests of its shareholders\u201d.<\/p>\n We\u2019ll see how that one plays out, but for now, what\u2019s going on here is a Sum of the Parts (SOTP) valuation approach. <\/p>\n That\u2019s prompted Market Matters CIO James Gerrish to run his ruler over a few of these SOPT spotlit ASX fund managers, to see if \u201cfurther value is lurking in the sector\u201d.<\/p>\n First in the high beams is Magellan Financial Group (ASX:MFG \u2013 $8.93, MC $1.62bn):<\/a> Two months ago, MFG appeared to bounce off a calamitous 10-year low of $6.24 to trade Thursday at $8.92. This time three years ago, it was pushing $60.<\/p>\n Last week it dealt with an issue that was hanging over its head, agreeing to buy back 650m of the 1,060m options (MGFO) at 10c each.<\/p>\n \u201cThe original granting of these options is an example of financial over-engineering that had unintended consequences,\u201d Gerrish notes. \u201cHowever, markets hate uncertainty, and this is one piece of the distracting hassle that\u2019s been dealt with by MFG.\u201d<\/p>\n Gerrish says a new CEO is next on the agenda for MFG\u2019s turnaround story. Whoever it is will inherit \u201ca very solid balance sheet, underpinned by ~$1bn of assets that could be used for some form of capital management\u201d.<\/p>\n \u201cWe are looking for MFG to test the $10-11 area into 2024 \u2026 our positions are now showing paper profits after struggling badly in October, but although it would be easy to \u2018grab them\u2019, we see another 15-20% upside.\u201d<\/p>\n Regal Partners (ASX:RPL \u2013 $2.51, MC $640m):<\/a> A smaller Sydney-based fund manager with an aggressive tilt towards growth and FUM now sitting at ~$10bn.<\/p>\n \u201cWhile we view the stock as reasonably expensive relative to their FUM, recent growth builds scale and diversification with a distinct skew towards alternative strategies,\u201d Gerrish says. \u201cPhil King heads up the group and he is a deal maker, our view being that Phil is looking to get big, then get out.\u201d<\/p>\n With the \u201cpotential to evolve strongly\u201d, Gerrish notes a forecasted 4% yield over the next 12 months for RPL \u2013 tempting, but \u201cnot the reason to own RPL\u201d.<\/p>\n \u201cWe are long RPL in our Emerging Companies Portfolio, initially targeting the $3-3.50 area.\u201d<\/p>\n And of course, there\u2019s Perpetual (ASX:PPT \u2013 $25.71, MC $2.9bn)<\/a>: <\/p>\n While PPT remains ~$1.50 below SOL\u2019s initial salvo, Gerrish believes \u201cthe game is afoot\u201d. \u201cWith SOL owning 9.9% of PPT, it\u2019s likely to have a major say in what comes next \u2013 if they\u2019re prepared to pay $27, they must believe it\u2019s worth well over $30.\u201d<\/p>\n \u201cWe should also remember the PPT board rejected the $33 bid from the Regal\/BPEA EQT consortium only ~12 months ago.<\/p>\n \u201cWe can see PPT trading above $30 before it retests $20, but the risk\/reward isn\u2019t overly compelling after last week\u2019s move.\u201d<\/p>\n With that in mind, Gerrish likes PPT \u201cbelow $25\u201d. Director, RM Corporate Finance<\/em><\/p>\n Location, location, location. Guy Le Page reckons \u201cthe paucity of competent operators and the lack of available capital to fund new gold plants in the region Kalgoorlie\/Coolgardie districts\u201d puts $97m gold explorer Beacon Minerals (ASX:BCN)<\/a> in a good place for expansion, with \u201cmany attractive open pit opportunities within trucking distance\u201d of its 100% owned Jaurdi mine.<\/p>\n It\u2019s recently snapped up the Lady Ida gold project to extend Jaurdi\u2019s life from three to 11 years, returned a \u201csolid EBITDA\u201d of $21.3 million for the 2023 financial year and has $4.4 million in cash and 4,500 ounces of bullion on hand.<\/p>\n And for some Christmas gravy, it\u2019s just won some East Timor concessions that are prospective for copper.<\/p>\n \u201cBCN represents if anything a good income stream from their existing Jaurdi plant based on their recent operating history with good prospects of increasing the resource base from their recent acquisitions,\u201d Le Page says.<\/p>\n The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.<\/em><\/p>\n <\/span><\/p>\n The post SUNDAY ROAST: The stocks that lit a fire under our experts this week<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
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\n<\/strong><\/p>\nGuy Le Page<\/h2>\n