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City of London Investment Group sails currency wave

Currency moves played an outsized role in the company's impressive results, but underlying performance is not to be discounted
February 21, 2017

Asked to rate his optimism about the current environment on a scale of one to 10, City of London Investment Group (CLIG)'s chief executive Barry Olliff says he is "about a six". This caution could be fairly surprising, given the emerging markets-focused investment manager's decent first half.

IC TIP: Buy at 375p

With more than 90 per cent of revenues being earned in the United States against 40 per cent of costs being paid out in sterling, its weakness relative to the dollar has benefited the reported period's performance considerably. Funds under management grew to $4.1bn (£3.3bn) at the end of December, from $3.8bn at the end of 2015. Better sentiment towards emerging markets was offset by underperformance and net client redemptions. But the outsized impact of the currency movements pushed revenues ahead by almost a third (see table), and trickled down to the pre-tax profit level.

The boost in earnings means the company should achieve its targeted dividend cover of 1.2 times for the current financial year, but a decision on the final dividend - and some visibility on FY2018 - won't be available until the year-end.

Analysts at N+1 Singer are forecasting adjusted pre-tax profits of £10.8m for the year to June and adjusted EPS of 31.5p (from £8m and 23.1p in FY2016).

 

CITY OF LONDON INVESTMENT GROUP (CLIG)
ORD PRICE:377pMARKET VALUE:£101m
TOUCH:363-380p12-MONTH HIGH:410pLOW: 285p
DIVIDEND YIELD:6.4%PE RATIO:12
NET ASSET VALUE:54pNET CASH:£6.6m

Half-year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201511.83.5810.68
201615.45.8017.68
% change+31+62+66-

Ex-div: 2 Mar

Payment: 17 Mar