PSG Konsult defies a challenging year

PSG Konsult continues to defy market conditions, posting double-digit increases in recurring headline earnings per share and assets under management in a challenging year for financial services businesses.

The group, which owns an advisory, asset management and insurance business, had actively engaged with its clients during the course of the year, said CEO Francois Gouws.

“Given the undulating economic conditions, you have to stay close to your clients,” Gouws said.

PSG Konsult’s recurring headline earnings per share climbed 16% to 43c over the year to February 2018. Total assets under management grew 17% to R205bn, as the group continued to grow its adviser force, which now numbers 784 across wealth and insurance.

Asset managers have battled to grow funds and stem outflows in the weak economy, as cash-strapped South Africans withdraw savings and generally save less. In this environment, PSG Konsult recorded nearly R20bn in net inflows across its wealth and asset management businesses.

PSG Konsult’s wealth unit had benefited from acquiring independent financial advisers, said Harry Botha, an analyst at Avior Capital Markets.

Its asset management unit had attracted inflows following high levels of alpha (outperformance relative to the market).

“PSG Konsult still has a lot of potential to grow,” said Botha, adding that this potential was “supported by adviser acquisitions in wealth, a subscale manager with levels of alpha in asset management and a stronger distribution network in short-term insurance”.

Botha said he expected PSG Konsult to continue stealing market share from competitors.

“We’ve got a lot of runway left in the South African market,” said Gouws. PSG Konsult’s market share across each business unit was below 5% of the overall respective markets.

Botha had upgraded his rating on the stock to a buy — from a previous hold and a sell in September — on improved growth prospects for SA and a decline in the share price over the past six months.

His 12-month target price is R10.24, about 13% ahead of its current level.

PSG Konsult’s share price gained 3.3% on Thursday to close at R9.05 a share. The general financials index, of which it forms part, was flat on disappointing performances from its parent, PSG Group and Brait.

17%

the growth in PSG Konsult’s total assets under management in the full year

R10.24

12-month target price of the share as set by an Avior analyst