CI Financial Corp.

CI Financial Corp. (TSX: CIX) is an independent company offering global asset management and wealth management advisory services.

Recent Update:

• The group announced changes in its two funds’ portfolio management. Marret Asset Management Inc. (an affiliate of CI) has been appointed portfolio manager of CI First Asset Active Credit ETF. Sentry Investment Management (a division of CI) has been appointed portfolio manager of a portion of CI Canadian Small/Mid Cap Fund.

• The Group confirmed the appointment of Bradley Hicks as Senior Vice-President, Head of Institutional division.

Monthly Highlights: CIX came up with its monthly data, wherein, the company’s total AUM declined 1.2% on an annual basis while increased 3.2% on a monthly basis.  Assets under management and Canadian Wealth management recorded an increase of 1.7% and 1.8% monthly growth, respectively. Total Asset under management (AUM), at the end of May 2020 stood at CAD 172 million, as compared to CAD 166.6 million in April 2020. Monthly average asset under management stood higher at CAD 118.7 million, reflecting an increase of 3.6% from April 2020.

Monthly highlights (Source: Company Reports)

Valuation Methodology: Price to Earnings Based Relative Valuation (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: At the end of May 2020, the company’s total asset under management improved by 1.8% and Canadian assets under management increased by 1.7% in the same month. An increase in the AUM would lead to generating higher fee income for the company. The group witnessed a correction in its share price led by sell stampede emerged in the global financial markets because of COVID-19. However, its share recorded a sharp recovery over a month over period and in the last five trading sessions and up by 25% and 5.5% respectively. Also, at the last traded price, shares were trading above its crucial short-term support levels of 5-day, 10-day, 20-day, 30-day and 50-day SMAs, which reflects a short-term upside momentum in the shares. Further, at the current price level, CIX is offering a lucrative dividend yield of 4.15%, which is approximately 7.6 times of the Canada 10 Year Benchmark Bond Yield is at 0.54%, which is single important measure from an income investor standpoint. We have valued the stock using Price to Earnings based relative valuation method and have arrived at a target upside offering lower double-digit (in percentage terms). For the said purposes, we have considered IGM Financial Inc (TSX: IGM), Fiera Capital Corp (TSX: FSZ) and Genworth MI Canada Inc (TSX: MIC) etc., as a peer group. Hence, we recommend a ‘Buy’ rating on the stock at the current market price of CAD 17.97 on June 5, 2020.

CIX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

IGM Financial Inc.

IGM Financial Inc. (TSX: IGM) is a leading assets and wealth management company with total asset under management CAD 163.2 billion (at the end of May 31, 2020). The Group derives its primary income from management and advisory fees, administration fees and Distribution fees.

The management declared a quarterly dividend of CAD 0.5625 cents per share, payable on July 31, 2020.

Financial Highlights for May 2020: IGM declared its monthly data, wherein the Company reported a 2.4% surge in Assets under Management from April 2020. For the month ended May 2020, Mutual Fund gross sales stood at CAD 1,434.8 million, while net new money stood at CAD 79 million. Investment funds net new money stood at CAD 145.8 million. Total Mackenzie Investments grew CAD 71.82 million, on account of a stable performance from mutual funds and ETFs segments.

Q1FY20 Performance: For the quarter ended March 31, 2020, IGM posted revenue of CAD 782.06 million, stood marginally lower than CAD 789.08 million in pcp. Management and advisory fees increase to CAD 562.08 million compared to 525.02 million in pcp, while administration fees remain stable at CAD 101 million. Earnings before income taxes stood at CAD 208.91 million, as compared to CAD 214.76 million, due to a lower income and higher interest and non-commission expenses, partially offset by a lower commission cost. Net earnings stood at CAD 160.67 million as compared to CAD 169.72 million. Net client inflow during the quarter stood higher at CAD 381 million, against CAD 62 million in the previous corresponding period.

Q1FY20 Income Statement Highlights (Source: Company Reports) 

Valuation Methodology: Price to Book Based Relative Valuation (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of IGM s corrected only ~5% in the last one year. The Company reported an improved AUM for May 2020 along with a positive client inflow, which is commendable and indicates the customer’s confidence. As the equity market is showing signs of recovery, we believe the flows to increase, which in turn result in higher assets under management. Higher AUM would result in a higher management fee. At the current traded price, the stock was trading above its 200 days simple moving average (SMA) of CAD 34.74, indicating a long-term bullish trend. The stock is offering an attractive annualized dividend yield of 6.6%, which is lucrative amid the current interest rate environment. We have valued the stock using Price to Book based relative valuation method and have arrived at a target upside offering lower double-digit (in percentage terms). For the said purposes, we have considered peers like CI Financial Corp (TSX: CIX), Ameriprise Financial Inc (TSX: AMP), Fiera Capital Corp (TSX: FSZ) etc. Hence, we recommend a ‘Buy’ rating on the stock at the current market price of CAD 34.78 on June 5, 2020.

IGM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

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