Pere­grine: A grow­ing spe­cialised player

Finweek English Edition - - PRO PICK -

In­vest­ment hold­ing com­pany Pere­grine Hold­ings, with a port­fo­lio of wealth and as­set man­agers op­er­at­ing in a rel­a­tively niche space, showed in its last set of re­sults that busi­ness is go­ing well. Head­line earn­ings per share (HEPS) grew a fur­ther 29.8% in the year to end March (+48.6% in the 2014f f inan­cial year), with the strong earn­ings per­for­mance and in­creased cash gen­er­a­tion equat­ing to a 50% in­crease in the com­pany’s fi­nal div­i­dend of­fer­ing. The earn­ings growth sees Pere­grine still trad­ing on a rel­a­tively mod­est price-toearn­ings ra­tio (P/E) of 12 times, while the in­creased div­i­dend of­fer­ing, which now nears a yield of 5%, pro­vides an at­trac­tive un­der­pin to the in­vest­ment case.

As noted by t he group’s CEO Jonathan Hertz, most of the group’s busi­ness seg­ments saw dou­ble-digit earn­ings growth in the last fi­nan­cial year. The busi­ness seg­ments in­clude Wealth and As­set Man­age­ment, Bro­ker­ing and Struc­tur­ing, Sten­ham and Ad­vi­sory. Pere­grine has diver­si­fied well into the afore­men­tioned seg­ments, which have a rel­a­tive dom­i­nance within the spe­cial­ist ar­eas of the mar­kets in which they op­er­ate.

The di­ver­sif ica­tion within these niche seg­ments have proven ef­fec­tive – a weaker re­sult in the per­for­mance fees from the wealth man­age­ment di­vi­sion was largely off­set by stronger per­for­mance fees gen­er­ated in the as­set man­age­ment busi­ness, in par­tic­u­lar in the hedge-fund di­vi­sion.

Pere­grine has ac­cu­mu­lated a cash pile of around R2bn, which pro­vides room for the likely pur­suit of fur­ther ac­qui­si­tions to en­hance earn­ings as it has done suc­cess­fully in the past. In the last fi­nan­cial year the group in­creased its hold­ing in the as­set man­age­ment Cents 3 200

3 000

2 800

2 600

2 400

2 200 PERE­GRINE HAS AC­CU­MU­LATED A CASH PILE OF AROUND R2BN, WHICH PRO­VIDES ROOM FOR THE LIKELY PUR­SUIT OF FUR­THER AC­QUI­SI­TIONS TO EN­HANCE EARN­INGS. busi­ness Sten­ham from around 71% to 81%, in­creas­ing its share of prof­its. The in­vest­ment in Java Cap­i­tal in the last fi­nan­cial year has added an ad­vi­sory man­date into the bro­ker­ing busi­ness as well as brought fur­ther as­sets un­der man­age­ment to the com­pany.

An­nu­ity in­come for Pere­grine has pro­gressed favourably to a healthy 51% of the group’s in­come. This is a level the com­pany would be look­ing to main­tain go­ing for­ward, as it pro­vides more cer­tainty in earn­ings than of the more volatile na­ture of vari­able in­comes (which have re­duced as a pro­por­tion of the com­pany’s in­come) within the group.

An i nvest­ment i nto Pere­grine Hold­ings in early 2013 would have pro­vided a cap­i­tal gain in ex­cess of 200% to date, with fur­ther yield be­ing re­alised from a div­i­dend which has pro­gressed well. While history pro­vides no cer­tainty of fu­ture out­comes, the strong earn­ings growth (which has es­sen­tially dou­bled in the last two years) has sup­ported share price gains and main­tained an in­ex­pen­sive val­u­a­tion rel­a­tive to the over­all mar­ket.

Pere­grine is a well-diver­si­fied lo­cal leader in a num­ber of highly spe­cialised ar­eas in the mar­ket and cer­tainly war­rants in­spec­tion for those look­ing for a long term ex­po­sure within the wealth and as­set man­age­ment space.

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