SPECTACULAR RESULTS, BUT I’M NOT BUYING
The Coronation trading update spooked the market, but it shouldn’t have. As I have highlighted before, management has continually been warning of the unsustainability of its profits – most recently it said in its September 2014 results: “Earnings are highly geared to market returns and shareholders should not expect earnings to grow every year off the current high base.” The past few results have been spectacular and even with a 5%-15% decline in diluted HEPS, Coronation is making serious money and paying a serious dividend. Further, assets under management grew from R588bn at the end of December last year to R636bn at the end of March. That all said, the stock is not even that expensive, at a price of around R90 and, assuming a 10% decline in HEPS the P/ E is around 18 times, average for the market. But with the potential for tough times ahead, I wouldn’t be looking to buy any.