Looking beyond Quilter for value

Wealth management company new to the JSE has tailwinds in store and its share price movement has ‘outperformed peers’

Investors will have to look beyond Quilter’s declining share price for value in the former Old Mutual’s wealth management firm, analysts said. Even though Old Mutual shareholders were invested in the UK wealth manager through Old Mutual Plc before the managed separation, Quilter is a new stock on the JSE.

Investors will have to look beyond Quilter’s declining share price for value in the former Old Mutual’s wealth management firm, analysts said on Monday.

Even though Old Mutual shareholders were invested in the UK wealth manager through Old Mutual Plc before the managed separation, Quilter is a new stock on the JSE. Though primarily listed on the London Stock Exchange (LSE), 61% of the shareholder base is still in SA.

The company managed and administered £118bn of investments on behalf of customers at the end of September. Quilter’s share price is down 18% on the LSE and 14% on the JSE since it listed on June 25. In pounds, shareholder returns are down 9% over the past four months, though SA shareholders benefited from a weaker rand.

But analysts say compared with its UK peers, Quilter has done better since it became a standalone company.

“I would argue that the share price performance has disappointed since listing. [But] they did pay a special interim dividend Having said that, Quilter’s peers are also down significantly more over the same period,” said Karl Gevers, head of research at Benguela Global Fund Managers.

Quilter is difficult to compare to any SA listed asset management company as it is more of a wealth manager and services mostly UK customers. Warwick Bam, head of research at Avior Capital Markets, said performance is also driven by other factors outside its control.

“Quilter’s earnings are dependent on equity and bond market returns and as such the share performance is a reflection of global market conditions rather than a company-specific concern,” he said.

Gevers said at its current price, Quilter’s share is still attractively priced when one considers its forward price: earnings (p:e) ratio.

The company is trading at 12 times its forward p:e, considerably less than its peers, the UK’s St James and Hargreaves Landsdown, but Gevers says Quilter has done well operationally and held its own better than the two as far as share price movement is concerned in 2018.

“Quilter has established itself as one of the larger wealth managers in the UK. Given the structural changes [pension fund reforms], it should experience some tailwinds,” he said.

Gevers said even though pressure on fees will continue to escalate and costs to retain and attract clients are likely to rise, it is in a good position to benefit from the reforms. “Regulatory changes are a risk for the business; however, they also provide an advantage as only the larger players with economies of scale will be able to navigate a highly regulated industry.”

Quilter has scaled up its operations drastically in the past six years. It acquired a number of financial advice businesses, including Intrinsic, which has doubled in size since Quilter bought it in 2015. By the end of June 2018, it had about 2,000 of its own financial advisers and 4,000 independent agents.

But Bam said after only six years, Quilter remains a young company that needs to prove it can deliver consistent results.