Interactive Investor

ii view: emerging markets fund manager Ashmore hopeful of upturn

Reducing costs and sat on a highly attractive dividend yield. Buy, sell, or hold?

6th September 2023 15:25

by Keith Bowman from interactive investor

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Full-year results to 30 June

  • Total Assets under Management down 13% from a year ago to $55.9 billion
  • Profit before tax down 6% year-over-year to £111.8 million
  • Final dividend of 12.1p per share
  • Total dividend for the year unchanged at 16.9p per share 

Chief executive Mark Coombs said:

"There is mounting evidence that the negative cycle has turned and, while the recovery may not be a straight line, it is well-supported by improving fundamentals across the larger emerging countries. Some investors remain cautious, but client activity levels are increasing and the combination of positive performance and attractive valuations available across Emerging Markets should drive capital flows over the medium term.

"Ashmore remains highly profitable, is delivering outperformance for clients and has a scalable operating platform, which means it is well-positioned to benefit from the ongoing recovery in Emerging Markets."

ii round-up:

Specialist emerging markets fund manager Ashmore Group (LSE:ASHM) today flagged a fall in annual profit as clients withdrew money but an improvement in investment performance.

Moves to reduce risk in the face of ongoing economic and geopolitical uncertainty pushed clients to withdraw $11.5 billion in funds, dumping profit 6% lower year-over-year to £111.8 million. However, active management delivered increased fund outperformance, with 69% of assets under management outperforming their respective indices over the last year compared to 45% the year before. 

Shares in the FTSE 250 company rose by more than 1% in afternoon trading having come into this latest news down around a fifth year-to-date. That’s similar to wealth manager St James's Place (LSE:STJ) but worse than a near 5% fall for computer driven hedge fund manager Man Group (LSE:EMG). The FTSE 250 index is down just over 2% during 2023. 

Ashmore invests in asset classes like government and corporate debt, equities, and real estate across the emerging markets on behalf of institutional and retail clients. 

London headquartered Ashmore flagged controlled inflation and reduced interest rates in some emerging markets as potentially aiding future performance, along with Chinese government stimulus. 

Adjusted group operating costs fell 4% year-over-year with variable remuneration costs down almost a quarter. The final dividend was left unchanged at 12.1p per share, leaving the total dividend for the year flat at 16.9p per share.

A first-quarter trading update is scheduled for 13 October. 

ii view:

Ashmore started out in 1992 as part of the Australia and New Zealand Banking Group. In 1999, it became independent and listed on the London Stock Exchange in 2006. Most of its investments are made across the debt markets, with around 11% in equities and under 3% in alternative assets. 

For investors, the rapid deterioration in the relationship between the West and Russia showcases just how quickly things can change. Tensions with China over Taiwan should not be forgotten, the rise of low-cost tracker funds has been pressuring active managements for some time now, while the total annual dividend payment has remained the same for the last four years. 

On the upside, Ashmore’s focus on emerging markets helps set it apart from the pack. A near peak in US interest rates may help ease economic headwinds, emerging economies should continue to grow faster than their developed counterparts, while future consolidation across the asset management industry also remains a possibility.

On balance, and while many risks clearly remain, a forecast dividend yield of over 8% is likely to keep more speculative income investors interested. 

Positives: 

  • Focus on costs
  • Attractive dividend (not guaranteed) 

Negatives:

  • Uncertain economic outlook
  • Fee pressure from ETF funds

The average rating of stock market analysts:

Weak hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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