This month the MSCI Emerging Markets Index (MXEF) rose 1% to 1100 (up 8.8% since 30 June 2017) and Sterling strengthened 5% to £1 = US$1.35 (12% above its January 2017 low). The former is positive and the later negative for City of London Investment Group (LON:CLIG).
Today, CLIG has published its Report and Accounts for the year ended 30 June 2017, which are precisely in line with the trading update of 19 July 2017. The provide supporting evidence behind the highlights:
CLIG total funds under management (FuM) 30 June 2017 were $4.7bn (£3.6bn) representing an increase of 17% in US$ terms for the year;
Positive investment performance with the exception of Frontier which was marginally negative; over the past year the MXEF index rose 24% and CLIG experienced US$306m of net asset outflows as clients rebalanced into Emerging Market equity gains;
Post-tax profits rose 45% to £11.6m (FY16: £8.0m);
Group diluted EPS rose 59% to 36.7p (FY16: 23.1p);
The final DPS was increased by 1.0p to 17.0p a share.
Management will hold an investor day on the afternoon of Monday 23 October 2017. Investors should call Zeus to obtain details.
Zeus view
Our forecasts are now based on £1 = $ 1.35 (8% weaker than $1.25). We reduce our FY18e revenue forecast by 6% (£2.0m) and our PBT forecast by 11% (£1.5m). We now forecast diluted EPS of 39.0p (11% below our previous forecast of 44.0p).
Assuming current exchange rates and MXEF remains at 1100, we reduce our FY19e diluted EPS forecast by 7% to 44.8p (previously 48.0p).
We leave our FY18e & FY19e DPS forecast unchanged as we expect dividend cover to be 1.4x and cash balances high (£18m: 68p a share) at 30 June 2018.
Valuation
At 397p CLIG shares are trading cum 17p final DPS which yields 4.3% on its own. CLIG shares go ex-D on 12 October. On our new forecasts, we expect CLIG to be trading on a PER of around 10x and on an historic dividend yield of 6.3% with prospects of 8% growth this year.
