ShoreCap hails strong Q1 net inflows at Man Group

Shares in Man Group are significantly undervalued, analysts at Shore Capital argued following the company’s first quarter update.

Contrary to what one might expect, in a quarter pockmarked by volatility the fund manager saw net inflows rise by $0.5bn, helping to keep its total assets under management on an even keel as of 31 March, at $78.6bn.

The performance of its AHL fund was particularly striking, with Quant Alternatives seeing “good” net inflows of $1.3bn (8.0%) and an excellent investment performance of +5% in a volatile quarter, “conditions not usually helpful to trend-following strategies”, ShoreCap analyst Paul McGinnis said in a research note sent to clients.

Nevertheless, a difficult first quarter did leave the fund manager nursing losses of 16.3% on its Japan Core Alpha product, versus a 12.0% fall for Tokyo’s benchmark Topix index.

Trading on 10.9 times ShoreCap’s earnings per share estimate for 2016 of 19.8c and sporting a 4.7% dividend yield, the company was changing hands at about a 20.0% discount to the sector.

That “[discount] materially undervalues […] and we think it should trade at a sector premium,” McGinnis said, sticking by his ‘buy’ recommendation and fair value estimate of 245p.

His peers at RBC were a bit more circumspect in their appraisal of the company’s solidness; hence their recommendation was held at a ‘sector perform’.

“Man’s efforts to diversify its product range and broaden its distribution network has resulted in net inflows during a volatile and uncertain Q1

“Man remains the most inexpensive asset manager that we cover and trades at 9.1x 2017E EPS (sector: 14.1x) and at 6.4x 2017E EBITDA (sector: 9.8x), largely because of the large proportion of performance fees that it derives and the lower visibility over net inflows,” RBC said.