ii view: high yielder Ashmore offers upbeat outlook

Leaving its dividend payment unchanged and on a forecast yield of over 6%. We assess prospects for this emerging markets play. 

First-half results to 31 December

• Assets under Management (AuM) down 11% to $57.2 billion
• Adjusted net revenue down 22% to £108 million
• Pre-tax profit down 54% to £53.8 million
• Interim dividend unchanged at 4.8p per share

Chief executive Mark Coombs said:

"The global macro environment in 2022 was complex, but the headwinds it produced are now receding and leading to an increase in investor risk appetite. This, combined with highly attractive valuations across equities and fixed income in Emerging Markets and low investor allocations, mean that Emerging Markets are set to continue outperforming as markets recover. Ashmore is well-positioned to benefit from this environment, with active management delivering alpha across equity and fixed income strategies."

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ii round-up:

Specialist emerging markets fund manager Ashmore Group (LSE:ASHM) today reported sales and profits at the upper end of City expectations, despite battling what it described as “subdued investor risk appetite.”

Assets under management (AuM) fell 11% year-over-year to $57.2 billion, helping drag pre-tax profit down 54% to £53.8 million. But management pointed to what it believes to be “receding global macro headwinds”.

Ashmore shares rose by more than 2% in UK trading, leaving them little changed over the last year having touched a low of below 180p per share. Larger rival Schroders (LSE:SDR) is down by around 13% over the last year, while hedge fund firm Man Group (LSE:EMG) is up close to a third. 

Ashmore invests in asset classes including sovereign and corporate debt, equities, and real estate across the emerging markets arena on behalf of its institutional and retail clients. 

A positive market performance adding $0.8 billion to AuM during the half was more than countered by client net outflows of $7.6 billion, given the tough backdrop of an ongoing war in Ukraine and rising global interest rates. 

Adjusted group revenue fell 22% year-over-year to £108 million, comprising of £98 million in net management fees and much of the balance in net performance fees. 

Around £700 million of capital resources including £480 million of cash support the balance sheet, with the interim dividend left unchanged at 4.8p per share. 

ii view:

Started in 1992, Ashmore is today a specialist emerging markets fund manager and constituent of the FTSE 250 index. Most of its investments are made across the debt markets with around 10% in equities and under 3% in alternative assets.  

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For investors, the emerging markets sector remains volatile and generally higher risk, underlined by an investor U-turn out of Russia. Concerns for the West’s relationship with China should not be ignored, while the use of low-cost exchange-traded funds (ETFs) continues to put competitive pressure on management fees. 

More favourably, a hoped for peak in US interest rates may ease economic headwinds. Emerging economies should continue to grow faster than their developed counterparts while about£700 million of group capital resources provides some reassurance.   

On balance, and while a dose of caution remains sensible, a historic and forecast future dividend yield of over 6% should keep income investors interested. 

Positives: 

• Cash held
• Attractive dividend (not guaranteed) 

Negatives:

• Uncertain economic outlook
• Fee pressure from tracker funds

The average rating of stock market analysts:

Weak hold