Published Date: 2021-06-08 | Source: INCE|Community | Author: The Finance Ghost
David Hufton is now in charge at Sygnia, after Magda Wierzycka stepped down on 31 May from the company that she built.
Hufton inherits a potent company that has been a disruptive force in the South African asset management industry. With assets under management and administration (AUM) as at 31 March 2021 of R278.3bn (up 27.8% vs. the prior year), Sygnia is well positioned for growth.
Importantly, in a country with a poor savings culture, most of the asset growth was thanks to appreciation in the value of the assets rather than net inflows. Asset managers give investors major look-through exposure to the markets, as their financial performance is clearly linked to the performance of the markets as a whole.
In the six months to March 2021, net inflows were only R3.8bn (1.5% organic growth) but AUM grew by R26.5bn, suggesting that R22.7bn of growth in the past six months was thanks to the market going in the right direction.
Interestingly, retail net inflows were R5.2bn and institutional net outflows were R1.3bn. This is further evidence that South African investors are starting to take matters into their own hands.
Revenue and profit growth has lagged asset growth, suggesting that Sygnia is generating lower fees per rand under management. Revenue as a whole was up 13.8% vs. the comparable six month period, with revenue linked to AUM up 32.6% but variable trading income (brokerage, securities lending and treasury) down 27.8%.
Profit from operations up 19.4% is nothing to be upset about and neither is the interim dividend jumping to 55c per share from 40c per share in the comparable period. That's a 37.5% increase in the dividend which speaks volumes about performance over the past year.
The FY20 final dividend was 70c per share. A total dividend over the past 12 months of 125c per share and a share price of R18.75 means that Sygnia is trading on a trailing dividend yield of 6.67%, which is substantial.
The big question for investors and management is: if markets go sideways this year, will Sygnia attract sufficient net inflows to keep up this growth rate?