International investment management company Magellan Financial Group Ltd (ASX: MFG) has once again come in with remarkable earnings gains. In the first half of financial year 2015, Magellan Financial more than doubled reported net profit to $77.4 million on total half-year revenue of $128.5 million.
The ASX was not a booming market in the six months ending 31 December, judging from the 0.7% gain of the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) during that time. However, overseas markets like the U.S. still continued to climb, making new all-time highs. That was to Magellan Financial's advantage as its international equities and pooled funds generated strong returns.
In the six months ending 31 December 2014, its Magellan Global Fund returned 18.1%. Over the past three and five years, that fund has generated average annual gains of 26.3% and 17.8%, respectively.
That translated into greater performance fees for the fund manager, which swelled to $32.6 million from $1.89 million in the previous corresponding period.
On top of that, client funds under management (FUM) increased from $23.5 billion to $31.6 billion during the interim period, giving Magellan Financial more funds to invest. The fund manager's reputation for strong performance attracts more clients who seek out better returns than they can get domestically.
Here are the half-year results highlights:
– Revenue reported revenue $128.5 million, up 91% from $67.1 million
– Profit before tax (PBT) $103.3 million, up 113% from $48.4 million
– Net profit after tax (NPAT) $77.4 million, up 115% from $36.1 million
– Earnings per share (diluted) 45.3 cents per share, up 113%
– Dividend per share interim dividend of 37.1 cents per share fully franked, up 125% from 16.5 cps
The stock is down 0.5% to $20.38 in afternoon trading following the results announcement.
Magellan Financial shares have risen 61.3% over the past twelve months and are currently trading at 41 times earnings. That's a high premium to pay, yet the fund manager has delivered impressive earnings growth.
It would be a potentially good stock to hold for the long term, but at the current share price investors would have to be confident Magellan Financial could continue high-double digit gains. I would wait for a pullback after such a strong run-up in share price.
