IGM Financial Inc.

Near-term Headwinds Keep us on Sidelines:  IGM Financial Inc. (TSX: IGM) is a leading assets and wealth management company with total asset under management CAD 147.5 billion (at the end of March 31). The company announced that it would unveil its Q1FY20 quarterly result on May 08, 2020.

IGM offers an array of investment products and the nature of business is correlated with the shape of the economy. Investors should note that during an economic crisis, asset management companies tend to struggle with the Funds Under Management (FUM) and diminishing Net Asset Value (NAV), due to ongoing price erosion in equity markets and hence, we remain on sidelines.

Recently, the company paid a quarterly dividend of CAD 0.5625 per common share, stood at par with the previous corresponding quarter.

Operating Highlights for March 31, 2020: IGM reported Assets Under Management of CAD 147.5 billion as on March 31, 2020, lower from CAD 162.5 billion as on February 29, 2020, and CAD160.7 billion as on March 31, 2019. The decrease was due to 9.2% and 9.4% month-on-month decline in Investment Funds Assets under Management and Mutual Funds segments, respectively. The company reported a gross sale of CAD 2.1 billion and net outflows of CAD 545.3 million, as compared to gross sales of CAD 1.7 billion and a net inflow of CAD 2.3 million in March 2019. IG Wealth Management reported asset under management of CAD 85.9 billion, down from CAD 94.8 billion as on February 29, 2020. However, net client inflow came in at CAD 380.5 million for the quarter ended March 31, as compared to CAD 61.7 million in the comparable prior-year period.

Operating Highlights (Source: Company Reports)

Stock Recommendation: The stock price has corrected ~34% during the last three months and have a market capitalization of CAD 6.17 billion. At current market price, the stock is trading close to the lower band of its 52-week trading range of CAD 40.38 and CAD 20.96. Due to the outbreak of COVID 19, fund management companies are witnessing an outflow of funds, reflecting near-term pessimism. The company reported a decline in AUM in March 2020. We expect, the uncertainty surrounding the economy will continue to take a toll on the performance of asset management companies and prefer to remain on sidelines until visibility improves. Hence, we recommend a ‘Watch’ stance on the stock at the closing market price of CAD 26.04 per share as on April 17, 2020.

IGM Daily Price Chart (Source: Thomson Reuters)

CI Financial Corp.

Higher Redemptions and Volatility Keeps Us At Bay: CI Financial Corp. (TSX: CIX) is a diversified & wealth management company, offering institutions and investors a wide variety of investment products and services. The company stated that it will announce its first quarter FY20 result on May 6, 2020.

The company recently announced a strategic alliance with Adams Street Partners, LLC. Adam Street will develop exclusive products for CI, which will help the company in offering its Canadian investors an option to invest in private investments across the globe.

Operating Highlights as on March 31, 2020: CIX has released its monthly AuM number, wherein the company posted a decline of 11.7% and 10.6% in assets under management and assets under advisement on month-on-month basis. The assets under management stood at CAD 112.2 billion at the end of March. Meanwhile, assets under advisement stood at CAD 43.7 billion. The total fee-earning assets stood at CAD 155.9 billion, down 11.4% month-on-month, and 11.7%y-o-y. The company witnessed a 13.7% decline in its monthly asset under management to CAD 115.7 billion. At the end of the first quarter of 2020, the company reported net redemptions of CAD 1.2 billion, reflecting an increase of CAD 0.8 billion over the fourth quarter of 2019. 

Operating Highlights for March 31, 2020 (Source: Company Reports)

Stock Recommendation: The stock has fallen ~39% in the past three months, and currently, the stock closed at 13.97 on 17 April 2020 with a market capitalization of ~3.08 billion. The stock is trading above its 20-days simple moving average (SMA) of CAD 19.87. Despite the significant decline in the stock price it fails to appeal. We believe wealth management companies will continue to witness net outflow of funds, at least in the near term.  While the company’s sales teams continue to engage with their clients, and provide services, higher redemptions keep us on sidelines. We expect the company’s total fee-earning assets to decline in coming months, reflecting ongoing uncertainty and redemptions. Weak economic outlook, spike in unemployment rate, and near-term pessimism could continue to hurt the company’s performance.  Hence, we recommend a ‘Watch’ stance on the stock at the closing market price of CAD 13.97 as on April 17, 2020.

CIX Daily Price Chart (Source: Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.