Peregrine: A growing specialised player
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
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.