- Cash conversion holds up despite outflows
- Broader emerging markets look becalmed
Results for emerging markets specialist Ashmore (ASHM) followed a detailed trading update earlier this year, but a series of one-off items – better margin mix, timing of mandates and positive forex rates – brought earnings before interest and tax in at £42mn, well ahead of the £36mn consensus. Total assets under management (AuM) were $54bn (£42.5bn), with outflows of $4.5bn already detailed.
At its best, the company is a consistent cash generator with cash from operations of £39mn, compared with operating profits of £34.2mn for the period. The key difference was the interest income that it earned from its cash deposits, which doubled to £12.8mn on the back of higher interest rates compared with this time last year.
Ashmore is heavily weighted towards sovereign and corporate debt, with equities at £6bn forming a relatively small proportion of its total AuM. This was reflected in the management fees breakdown, with Ashmore earning £59.7mn from fixed income assets and £13.6mn from equities. Broadly speaking, the net fee margin was stable at 39 basis points.
However, the market noted the ongoing struggles of Ashmore’s investment portfolio. According to Peel Hunt, the group’s investment performance so far this year is approximately -1.9 per cent, slightly better than the estimated benchmark performance of -2.1 per cent. The reason for this is China’s lagging economy pulling down the value of a host of emerging market equity and bond indices.
Peel Hunt values the shares at a price/earnings ratio of 19 for this year. We share the broker’s caution that the indifferent outlook will make winning and retaining new funds challenging. Despite a favourable forex environment there is no obvious value on the table. Hold.
Last IC View: Hold, 196p, 6 Sep 2023
| ASHMORE (ASHM) | ||||
| ORD PRICE: | 205p | MARKET VALUE: | £1.5bn | |
| TOUCH: | 203-205p | 12-MONTH HIGH: | 285p | LOW: 156p |
| DIVIDEND YIELD: | 8.2% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 122p | NET CASH: | £447mn | |
| Half-year to 31 Dec | Turnover (£mn) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
| 2023 | 104 | 53.8 | 6.48 | 4.8 |
| 2024 | 93.4 | 74.5 | 8.65 | 4.8 |
| % change | -10 | +38 | +33 | - |
| Ex-div: | 29 Feb | |||
| Payment: | 02 Apr |
