IGM Financial Inc. (TSX: IGM) operates through two divisions, namely asset management (operated through Mackenzie Investments) and wealth management (via its Investors Group Wealth Management and Investment Planning Counsel subsidiaries) and provides investment management products and services. 

Key Updates:

• Growth from the Wealth Management segment: The company reported a constant inflow of funds within the IG Wealth Management segment. This is impressive considering the ongoing macros scenario along with the geo-political turmoil. Notably, the company provides financial planning, investment advisory and related financial services under segment. Assets under advisement under the IG Wealth Management stood at CAD 116.2 million in Q1FY22, up 8.1% on y-o-y basis. This was primarily driven by higher inflows on account of impressive demand dynamics.

• Increase in Profitability: In Q1FY22, the group reported its Adjusted EBIT of CAD 312 million, which is higher than CAD 290.2 million in pcp. This was primarily due to a higher revenue (CAD 857.2 million v/s CAD 800.5 million in pcp) coupled with improved cost management.
  

• Growth in Asset Under Management and Advisement: Assets under management and advisement stood at CAD 268.3 billion as on Q1FY22, which is higher than CAD 248.5 billion at in pcp, reflecting an increase of 8% on y-o-y basis. Total assets under management were CAD 237.1 billion in Q1FY22, which increased 7% on y-o-y basis. This was supported by net inflow of CAD 2.5 million during the period.

Risks associated with the Investment:

The company’s performances might be hindered due to the extension of the ongoing pandemic, as it would impact the overall investor’s sentiment. Moreover, any volatility in the capital market and debt-market would lead to higher outflow of funds. 

 Q1FY22 Financial Highlights:

• IGM announced its first quarter FY22 result, wherein the company posted its total revenue of CAD 857.2 million v/s CAD 800.4 million in pcp. The growth was driven by higher income from the wealth management and asset management segments.
• The quarter was marked by higher advisory & business development expense along with a surge in the operations and support costs. Earnings before income taxes stood higher at CAD 283.9 million, as compared to CAD 262.0 million in pcp, thanks to the elevated income, partially offset by higher expenses.
• The company reported its net earnings of CAD 220.1 million, which is higher than CAD 202.3 million in pcp. This is supported by higher earnings before income taxes, partially offset by a lower income tax expense.

Valuation Methodology (Illustrative): Price to Book value

Analysis by Kalkine Group

Stock Recommendation:

Despite the ongoing challenging macros along with volatile global equity markets, the company ended the quarter on a positive note. The stock of IGM is carrying an attractive dividend yield of ~6.445% on an annualized basis, which looks impressive considering the ongoing interest rate scenario.

We have valued the stock using the price to book value-based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Franklin Resources Inc, CI Financial Corp etc. Considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock of IGM at the last closing price of CAD 34.91 on June 17, 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on June 17, 2022). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV 

Technical Analysis Summary

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