Ashmore Group - Emerging value in a heated market?

Ashmore Group: I find this one of the trickier stocks to get a handle on. Focussed on emerging market debt, it tends to be either flavour of the month or a pariah. With the investment world adding to the world’s greenhouse emissions as they gas on about US rate rise timings, so emerging markets and currencies have come under pressure. The latest company news comes by way of a third quarter trading update to 31^st March 2015. This shows AUM a slightly disappointing -4.1% at $61.1bn, with the fall comprising $2bn of net outflows and $0.6bn of investment performance. Within this the three largest strategies of External Debt (-1.6%), Local Currency (-3.8%) and Blended Debt (-3.3%) all showed lower falls than the average. The two big drops were Alternatives (-30.8%) and Multi-strategy (-15.0%), totalling $0.7bn of outflows. They comment that the negative investment performance was ‘primarily’ due to weak local currencies, but they did beat the relevant indices. At the same time, net fund flows were negative but reduced from the previous quarter as some clients started to bottom fish. Despite the shadow cast by US rate expectations, Ashmore expect that the investment opportunities that have opened up in their markets will see improving fund flows. Only time will tell whether that is sound forecasting or necessary optimism.

Being a quarterly update, there is no information on margins, which are either appropriately high for a specialist or an accident waiting to happen, depending on your view. The most likely course is a gentle erosion over time, but without lurches. So, for the year to 30^th June 2015, consensus eps is about 21p for a PE of 15.1x at 317p, but with little if any growth in FY2016 as this year’s AUM backwash rolls on. Last year’s dividend was a covered 16.45p and 17p looks a good ball-park for this year, for a juicy yield of 5.4%. Back in October I was lukewarm about the stock at 294p, when the FTSE 100 was about 6200. At current market levels fewer and fewer stocks look attractive. So, with Ashmore having lagged a rampant market and having that attractive yield, I think it may well be worth squirreling a few away now. (Neil Cumming^, 15^th April 2015)

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. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower