Share of the week: A fundie hitting multi-year highs

A quick scan through the FTSE 100 (UKX) index threw up plenty of big movers, but none that captured the imagination. The blue-chip index’s little brother, the FTSE 250 (MCX), looked more promising, though the two big risers, Aldermore (ALD) and Millennium & Copthorne Hotels (MLC), are the subjects of takeover offers.

Aside from that, we’ve covered third-quarter updates from reassured takeaway pizza chain Domino's (DOM) and bullish recruiter Robert Walters (RWA), while today we reviewed the outperforming hedge fund manager Man Group (EMG), which is riding high thanks to increasing demand for emerging market (EM) strategies.

Talk of the latter brings in fellow EM-focused asset manager Ashmore (ASHM), which was the biggest riser on the FTSE 350 ex Aldermore and Millennium. After a month of trading sideways, a first-quarter trading statement provided the catalyst it needed to shoot higher Friday.

Assets under management (AUM) of $65 billion for the period ending 30 September beat analyst expectations by around $4 billion, or 6%. Net inflows of $4.3 billion were four times forecasts of $1.1 billion and Ashmore’s best result in four years.

Combined, that sent shares rocketing as much as 11%, before eventually settling 7% higher at 378p. Having risen 3% Thursday in anticipation, it takes gains in the week to 11%.

 

Chief executive Mark Coombs said investors are increasingly focusing on emerging markets. That helped both Ashmore and Man outperform today. It’s also why Jupiter Fund Management (JUP) is up 4.2% this week, although EM isn’t as crucial to its fortunes.

“Emerging Markets are continuing to outperform as we would expect at this point in the cycle, with perceived challenges such as rising US interest rates having been anticipated and priced in,” Coombs adds. “Ashmore is well positioned as investors address their underweight allocations to emerging markets.”

While it’s still very early in the year, broker UBS has been busy raising estimates for earnings per share (EPS) through 2018-20 by 4%, and it reckons others will follow suit – Peel Hunt is reviewing its forecasts.

UBS has also upped its price target to 425p, implying a further 14% upside. “Given the positive flow momentum and strong absolute and relative performance of Ashmore’s strategies, we reiterate our ‘buy’ rating and continue to view it as a top pick,” says analyst Michael Werner.

Forward valuation multiples look fair at 10.2 times enterprise value to operating profit compared versus a sub-sector average 10.9; and 16.5 times price/earnings (PE) compared to 14 times.

“We believe the momentum in flows will lead to strong share price performance,” says Peel Hunt’s Stuart Duncan. “In addition, the key remains the longer-term opportunity – investors remain underweight emerging markets, which in turn are less susceptible to the rise of passive investment.”

There’s also a 5% dividend yield to support the investment case.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. 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.

Source.