Specialist emerging markets asset manager Ashmore (ASHM) delivered a 13% increase in assets under management to $94.4 billion in the year to 30 June 2021 as it attracted net inflows of $1.2 billion and investment performance chipped in the $9.6 billion balance.
Adjusted pre-tax profit of £286 million came in ahead of market expectations, although the lately-unloved shares cheapened 5.1% to 375p as a slightly lower management fee margin weighed on sentiment.
Ashmore’s adjusted net revenue fell 9% to £296.6 million, which the company said reflected its ‘stage in the recovery cycle and impact of mix effects on net fee management fee margin’.
There was also disappointment as Ashmore conceded its intermediary retail clients have been relatively slow to return to emerging markets.
Though Ashmore is best known for its fixed income investments, last year’s standout performer was the relatively small equities division, which saw assets under management increase 61% to $7.4 billion as it delivered ‘excellent’ investment performance.
CEO Mark Coombs insisted his charge has made ‘significant progress against its strategic objectives over the past year, generated outperformance for clients, and the group’s robust business model has delivered a financial performance that reflects the early stages of a cyclical recovery.’
As vaccination rates increase across the world and governments ease social restrictions, economic activity is picking up and ‘reinforcing the emerging markets growth premium’ according to Coombs, who notes ‘hawkish central banks in many emerging countries are acting to contain inflation’.
He adds: ‘This environment provides attractive opportunities for investors to increase allocations with heavily discounted equity valuations in emerging markets and high real yields compared with the negative rates in developed markets.’
THE NUMIS VIEW
With a ‘reduce’ rating and 360p price target for Ashmore, Numis considered the underlying result ‘broadly in line with expectations’, though the broker said there could be some minor impact on forecasts due to the slightly lower management fee margin.
It commented: ‘We continue to like the Ashmore business on a medium to long term basis, but still consider the current investment performance a meaningful risk to the shorter term outlook.’
Medium to long term however, the broker reiterated Ashmore is ‘a stock we would want to own for the structural emerging markets growth story and we note the very safe dividend.’
