There are some compelling reasons why the share price of Magellan Financial Group Ltd (ASX: MFG) looks attractive, according to a couple of fund managers.
A quick overview of Magellan
Magellan describes itself as a specialist funds management business established in 2006 and it's based in Sydney. Magellan Asset Management managed approximately $103 billion of funds under management (FUM) at 30 November 2020 across its global equities, global listed infrastructure strategies and Australian equities for retail, high net worth and institutional investors. Magellan employs over 120 staff across the world.
Magellan's investment in Guzman y Gomez (GYG)
Before I get to the reasons why fund managers like Magellan, the company announced a major investment today. It's buying a 10% stake in GYG for $86.8 million. GYG is an Australian based quick service restaurant chain specialising in made to order, fresh Mexican food with 147 restaurants across Australia, Singapore, Japan and the US.
GYG is led by founder and CEO Steven Marks. The chairman is Guy Russo, who used to be the CEO of McDonalds as well as Kmart and Target.
Hamish Douglass, the chairman of Magellan, said: "We are extremely pleased to become a shareholder in GYG. Magellan has deep investment experience in the quick service restaurant industry and we believe Magellan can both add and gain considerable insights as a major investor and supportive shareholder. GYG is a world class business with enormous growth potential and represents a highly attractive investment opportunity for our principal investments business."
GYG is aiming to become the best restaurant company in the world and it think it's now entering the most exciting phase of growth.
Reasons to consider Magellan at this share price
Dr Don Hamson from Plato Investment Management, which specialises in maximising retirement income for retirees, said that Magellan was a good dividend share. He liked the Magellan FY20 result and pointed to the fact that Magellan increased its final dividend by 10% compared to last year.
In terms of the FUM and growth, he said that it bodes well for Magellan that the average FUM was up 26% over the year to $95.5 billion. Dr Hamson said that Magellan is doing really well in the current market COVID-19 environment. The growth stocks in the US, which Magellan is exposed to, is doing really well according to Plato.
In the Magellan FY20 result it also said that its adjusted net profit after tax (NPAT) grew by 20% to $438.3 million. Adjusted earnings per share (EPS) grew by 17% to 241.5 cents.
Meanwhile, James Gerrish from Market Matters thinks that Mr Douglass has steered the Magellan ship admirably over the years.
Mr Gerrish said that Magellan is a quality manager that called the transition to the US and global tech shares extremely well. Market Matters said that it's valued at a premium to most of the fund management sector, but Market Matters thinks it's deserving of this status.
Market Matters says that it likes Magellan shares in the mid $50 region. At the time of writing the Magellan share price is indeed at around $55 after the Guzman y Gomez investment news.
According to Commsec projections, at the current Magellan share price it's valued at 17x FY23's estimated earnings. It also offers a partially franked dividend yield of 3.9%.
