Holders of shares in Magellan Financial group have been a large winner over the past 5-years with performance in share price up 141.79%. So we take a look at Should I Buy Magellan Shares (ASX:MFG)

ASX:MFG Share Price

Whilst the broader ASX market seems to have recovered from and is hitting new all time highs since the COVID19 pandemic. MFG Shares seem to have stagnated and are currently sitting in a range between $45 and $65 per share.

This is largely due to the type of business Magellan Financial Group Shares participate in which is Funds Management. Where the performance of the company is largely linked to the underlying movement in the assets which ASX:MFG manage.

MFG has dropped off slightly from its year high in Aug 2020, their 52-week range is 42.01-66.00. Its current market capitalization is AUD$9.9billion.

Over the past 10-years, MFG has made excellent returns for investors with their share price increasing 4154%. Each year the share price has made an average gain of 41.06%. MFG also currently pays a dividend yield of 4% which is decent considering the capital growth investors have also received over the past years.

Should I Buy Magellan Shares: About

Magellan was formed in 2006 to generate attractive returns for clients by investing in global equities and global listed infrastructure while protecting their capital.

Magellan manages more than A$113 billion (as at 30th June 2021) in global equity and infrastructure strategies for clients based around the world.

Magellan was founded in 2006 by Hamish Douglass and Chris Mackay and has offices in Australia, New Zealand and the US. We are a wholly owned subsidiary of Magellan Financial Group, which is one of the top-100 stocks by market value on the ASX.

Magellan’s Funds:

The company offers investors the opportunity to invest in specialized and focused global equity portfolio’s. The objective of these funds is to achieve attractive risk adjusted returns over the medium to long term while reducing the risk of permanent capital loss.

Magellan also offers infrastructure assets funds, with requisite earnings reliability and a linkage of earnings to inflation, offer an attractive, long-term investment proposition. Here

Should I Buy Magellan Shares: Dividend History

ASX:MFG shares typically announce a dividend with the release of its half-yearly results in November and full-year results in May as seen in their financial calendar. Dividends are typically paid twice a year, in August (Final Dividend) and February (Interim Dividend).

Magellan at the current price of $53.92 has a dividend yield of 4.06%

Magellan Financial Group Dividend History

The company does not currently offer a DRIP for their investors

DPS(TTM)$2.191
Gross DPS(TTM)$2.8953
Dividend yield4.06%
Gross yield5.37%
Payout Ratio90%
DRPNo
DRP Features
Key Dividend Data for MFG

Investor Sentiment ASX:MFG

After surveying 143 Investors about their current ASX:MFG shares sentiment: BUY-HOLD-SELL, as well as their target price over the next 12-months here are the results;

Investor Sentiment Survey MFG

The results from this survey show there is currently a strong Bullish investor sentiment on ASX:MFG shares. So how much are MFG shares worth? Let’s get into it.

Should I Buy Magellan Shares: Fundamentals

Market Cap$9,910,159,162
Shares Issued183,793,753
ASX Rank54
PE24.43
EPS$2.207
Volume 4W Avg417,335
VWAP$53.88
PEG1.6
NTA per Share$5.36
ROE36.7%
Debt$0
Equity$1.099billion
Should I Buy Magellan Shares: Fundamentals

Based on current fundamentals MFG seems reasonably valued within its sector and the broader market.

Their current PE ratio of 24.43x is slightly higher than the bounds of the 15-20x market average. Their ROE has been decent at 36.7%.

We can also see that MFG has an NTA per share of $5.36. This represents ~10% of their current valuation being backed by tangible assets.

In our opinion the higher PE can be justified than the higher than industry average PEG.

Fundamental Comparison

Should I Buy Magellan Shares, MFG Share Price
Peer Comparison of Magellan Shares

Should I Buy Magellan Shares: Financials

On the 11th February 2021, MFG Shares released an interim Report and Financial Statements for the Half Year Ended 31 December 2021. Highlights from the HY21 included the below:

  • Total Revenues down 12.4% to $319million
  • NPAT up by 3.4% to $202million
  • Net Tangible Assets per share of $5.36
  • Announcement of HY dividend of 77.1 cent per share partly franked (75%).

Maintains a strong balance sheet and accordingly had $984.7 million of net tangible assets as at 31 December 2020.

During the period, the Group saw a 9% growth in average FUM over the previous corresponding period, to $100.9 billion (average FUM of $92.8 billion for the six months ended 31 December 2019). We are pleased with this outcome, particularly given the severe market volatility seen around the world driven by the COVID-19 pandemic and the headwind of the rising Australian dollar

Income Statement

We can see from the historical data that MFG is growing revenues significantly over time, this corresponds to their FUM, typically as FUM increases so will the revenue. MFG Gross profit is also significantly high for the ASX typically maintaining GP at above 80%.

MFG Historical Income Statement

Balance Sheet

Magellan in our opinion has one of the best balance sheets out of any large cap ASX listed share. MFG has 437.51million in cash and cash equivalents as of 30/06/2020, with 0 long term debt. Although the company does have a debt facility should this be required from time to time to take advantage of headwinds which may exist.

MFG Historical Balance Sheet

Insider Ownership And Trading

We can see that once again MFG is largely owned by the general public and individual insiders with ownership over 68%, and 31% of the business respectively. Private companies own 3.7% of the business, and Institutions only own 0.2% of the business. When compared to other blue-chip Australian companies this ownership breakdown is very common.

Ownership Structure of MFG ASX

Its great to see such a large ASX listed company being owned with a 12.09% of the company being owned by their founder and current CEO Hamish Douglas with a holding value of $1.2billion. Christopher Mackay a Managing director also owns significant portion of shares at 9.53% and over $940million worth. Understandably Blackrock and Vanguard are the next largest holders.

Should I Buy Magellan Shares: Prophet’s Take

Magellan Group has performed very strongly during the last 5 years and the 10 year growth is phenomenal! MFG have in our opinion one of the strongest balance sheets of any ASX listed company.

MFG continue to add FUM at a decent rate, which should overtime translate into additional profits coming out the bottom line. A key risk here is that FUM will continue to grow inline with the performance of the underlying assets which MFG hold in the portfolio’s that they construct. So as long as the performance continues FUM should continue to grow.

We are bullish on MFG. But are currently exploring other opportunities.

Please Remember all Articles Published on Prophet Invest are Opinion Only

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