Ashmore Group
Ashmore is a very
successful manager of emerging market funds, with a bias towards debt and bond
offerings. Due partly to their specialist brief they enjoy high margins with
EBITDA margin of around 65%. However all is not well at the moment. The
impending end of QE in the USA as tapering comes to its conclusion is making
investors fret about the immediate future for emerging markets. The lure of
being out of the dollar and enjoying a ride on the ‘carry trade’ of an emerging
currency is fading. In their first quarter update Ashmore have revealed AUM of
$71.3bn, somewhat weaker than the $72-76bn range that analysts had been
forecasting. The worry is that AUM could face further pressure as investors
cash out and that the handsome margins may end up being squeezed, despite
having held good for many years so far.
Having fallen
some 25% over the last year the shares are around 294p. On reduced expectations
of say 21p earnings for June 2015, this is a PE of 14 and the likely 17p
dividend is a yield of 5.8%. The balance sheet is strong with spare cash on
board, so despite low dividend cover of 1.2x there is no reason to fear for
this year’s dividend. So this all looks attractive enough, but I am fretting
about the apparent loss of momentum at the group. Investment fads are very
fickle and emerging markets look well set for the medium and long term, but
just now there seems little rush to buy Ashmore. (Neil Cumming, 14th October 2014)
These comments are not a personal recommendation to deal.
Any investments can fall as well as rise in value, so you could get back less
than you invest. I may have a financial interest in some of the stocks written
about.
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