Fiera Capital Corporation (TSX: FSZ) is a Canadian asset management company that offers traditional and alternative investment solutions. It provides investment advisory and related services to institutional investors, private wealth clients, and retail investors.

Key Highlights:

• Decrease in net earnings: During Q1FY22, the company reported a decline in the net earnings to CAD 5.45 million against the net earnings of CAD 23.02 million in Q1FY21. The impact of the increase in the overall revenue was completely offset by the increase in the expenses during Q1FY22, which resulted in the overall decline of the net earnings.

• Sequential decline in Asset Under Management (AUM): The group reported a decline in the total asset under management to CAD 174.5 billion in Q1FY22 against the total AUM of CAD 188.3 billion in Q4FY21. The decline was due to unfavorable market pressure when the global market experienced a sell-off and redemption pressure was seen, across all asset classes.

• Poor profitability margins: During Q1FY22, the company reported a slight increase in the revenue but the surge in overall expenses completely offset the positive impact of the higher revenue, when compared with Q1FY21. This resulted in over deteriorating profitability margins, which are presented below.

Source: Refinitiv, Analysis by Kalkine Group

• In-efficient debt management: During Q1FY22, the group reported higher debt on a sequential basis, which lead to a pressure on its balance sheet. The inefficiency of the company in managing its debt is presented below when compared against the industry median on the various debt metrics and ratios.

Source: Refinitiv, Analysis by Kalkine Group

Valuation Methodology (Illustrative): Price/ Book-value based

Analysis by Kalkine Group

Stock Recommendation:

The company reported a decrease in the total AUM to CAD 174.5  in Q1FY22 as compared to the previous quarter of CAD 188.3 million, on account of unfavorable market pressure and global meltdown. The group saw a decline in the net earnings to CAD 5.45 million in the reported period (Q1FY22) against the net earnings of CAD 23.02 million in the pcp, which is a key reason of concern. On the valuation front, the stock is measured on the Price/ Book-value based relative valuation multiple, and the stock is currently offered at 2.8x against the industry (financials) mean of 1.3x, implying the stock is still overvalued. We have considered Wisdom Tree Investments Inc., and Hywin Holdings Ltd. as the peer group for the comparison.

Therefore, based on the above rationale and valuation, we recommend a “Sell” rating on the stock of FSZ at the last closing price of CAD 9.82  on June 07, 2022.

One-Year Technical Price Chart (as of June 7, 2022). Analysis by Kalkine Group

Note: The reference data has been partly sourced from REFINITV

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