瑞信-亚太地区-金融业-澳大利亚金融业：财报季风险呈下降趋势-2019.2.4-51页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.4 February 2019Asia Pacific/AustraliaEquity ResearchDiversified Financials Australian Diversified Financials PRE RESULTS COMMENTResearch AnalystsJames Cordukes,CFA61 2 8205 4858james.cordukescredit-Andrew Adams61 2 8205 4106andrew.adamscredit-Anna Milne61 2 8205 4369anna.milnecredit-Reporting season risks skewed to downsideWe generally see more downside risk amongst the diversified financials ahead of reporting season.However following a sector de-rating we expect that those who deliver on earnings could see a positive share price response.Results with downside earnings riskCGF:Despite a pre-announced result,we still see scope for downside risk.Flows could disappoint,details in the result could raise concerns of further COE margin compression and discussion on regulatory tailwinds could be less optimistic than in the past.CPU:A deterioration in operating conditions late in 1H19E reduces the likelihood of an upgrade to FY19E guidance.While we expect CPU can still meet its guidance,this could still disappoint some who were expecting an upgrade including consensus(who sit 4%above the guidance).NWL:Consensus earnings appear too high with this result holding the potential to see consensus downgrades to revenue and EBITDA margins.IFL:While the focus will be on the impact of APRAs actions,the Royal Commission and ANZ acquisition,there is downside earnings risk due to a cost miss(higher cost inflation due to compliance/regulatory burden).PTM:Despite FuM being known and post balance date guidance on performance fees and investment income,consensus forecasts look too high posing downside earnings risk.The flows outlook could also be bleak.HUB:There is potential for disappointment on revenue margins(client mix,competition)and EBITDA margin(cost inflation for client on-boardings).Results with mixed trends and low surprise resultsJHG:While inexpensive(9.5x),this result is unlikely to be a turning point with outflows likely to accelerate in 4Q18E and management likely to be cautious on the outlook.Any buy-back is likely to be tokenistic.ASX:A low surprise result given activity levels are known.Focus will be on updates on some of the strategic initiatives(DLT,Sympli,data analytics).MFG:A low surprise result given FuM,flows and performance fees are pre-announced and consensus forecasts seem fair.LNK:We see scope for a disappointing result in FA(account losses)and cautious commentary on Brexit to be offset by more optimistic commentary on PEXA,opportunities to deploy excess capital and FA(potential for re-pricings to offset regulatory headwinds,strong member growth).PPT:The first result under the new CEO/CFO could pose earnings risk due to a rebasing,however,we will also gain for the first time insights into the new CEOs strategy(likely to include organic and inorganic aspects).4 February 2019Australian Diversified Financials2February 2019 reporting seasonWe have collated our thoughts for the Diversified Financials sector ahead of the February 2019 reporting season.Figure 1:Summary of February 2019 reporting season expectations in A$millions,unless otherwise statedCompanyDatePeriodRatingNPAT($mn)EPS(cps)Target Price(A$)Earnings RiskCurrent ResultPCP%chgCurrent ResultPCP%chgJHG5-Feb-194Q18EUPFM$26.00MixedUS$124.6US$147.9(16%)US62.1cUS72.8c(15%)CGF12-Feb-191H19ENTRL$7.55Downside$200.1$207.9(4%)33.2c35.2c(6%)CPU13-Feb-191H19ENTRL$19.00Downside$176.3$166.86%32.5c30.5c6%ASX14-Feb-191H19EUPFM$55.00Low Surprise$234.9$230.52%121.3c119.1c2%MFG14-Feb-191H19EOPFM$29.00Low Surprise$167.5$109.253%94.8c63.4c50%LNK15-Feb-191H19EOPFM$8.20Mixed$113.2$92.023%21.3c18.9c13%NWL18-Feb-191H19ENTRL$7.75Downside$16.8$14.119%6.9c5.8c19%IFL19-Feb-191H19ENTRL$4.60Downside$107.2$94.811%30.5c29.8c0%PTM21-Feb-191H19EUPFM$4.50Downside$68.3$102.2(33%)11.7c17.4c(33%)PPT21-Feb-191H19ENTRL$33.00Mixed$64.6$71.5(10%)137.8c153.0c(10%)HUB26-Feb-191H19ENTRL$13.80Downside$4.9$2.1132%7.8c3.5c122%Source:Credit Suisse estimates4 February 2019Australian Diversified Financials3JHG UNDERPERFORM(A$26.00 target price)Date:5 February 2019Time:After market (8pm AEDT)Period:Fourth Quarter/Full YearEarnings Risk:MixedCredit Suisse estimatesBriefing and dial-in detailsAdjusted NPAT 4Q18E:US$124.6mn(US$147.9mn 4Q17)Adjusted EPS 4Q18E:US62.1cps(72.8cps 4Q17)DPS 4Q18E:US36.0cps (32.0cps 4Q17)Australia(6 Feb):12am AEDTOther(5 Feb):8am New York;1pm London Australia:1800 573 793;US:800 239 9838International:+1 323 794 2551;Code:943 7527Source:Company data,Credit Suisse estimates4Q18E ForecastsWe are forecasting 4Q18E Adjusted NPAT of US$124.6mn,down 16%YoY due to lower average AuM(-2%),lower management fees(-2bp)and lower performance fees(-94%).The decline is despite the benefit of an additional US$10mn of synergies compared to a year ago(6%NPAT benefit)and a fall in the tax rate(22%vs 32%in 4Q17).We are forecasting 4Q18E Adjusted EPS of US62.1cps which is 2%below the Bloomberg consensus of 63.3cps.JHG has provided guidance for several operating metrics in FY18E.JHG expects the operating margin to be in the very high 30s(CSe 38.9%),the compensation ratio to be in the low 40s(CSe 41.7%)and non-comp cost growth of 18%(CSe+18%)which factors in 8%growth excluding MiFID II related research costs(US$19mn)and one off legal costs(US$12mn).What to look for Large decline in AuM in 4Q18E(CSe-11%QoQ)due to negative market movements(CSe-9%)and sizeable outflows(CSe-US$8.5bn).Industry data indicates that JHGs retail business experienced US$7.5bn of outflows in 4Q18E driven out of both the UK/European and US regions and across most asset classes including equities(-US$4.8bn),fixed income(-US$1.5bn)and alternatives/balanced(-US$1.2bn).Declining management fee margins as a result of general fee pressure and a larger fall in higher margin equities AuM.Cautious commentary on the outlook particularly around operating margins.Lower AuM and revenue margins will create a significant headwind in FY19E.While there is some flexibility in the cost base(including a profit share bonus scheme)it is unlikely to be enough to prevent a decline in the operating margin(CSe FY19E 35.6%vs FY18E 38.9%).We also note the potential closure of the Australian equities strategy could be part of a broader program to rationalise sub-scale products.Likely announcement of a buyback.JHGs dividend policy leaves room for JHG to undertake a buyback each year.We are forecasting a buyback of US$140mn in FY19E up from the US$100mn in FY18 which represents 3%of market cap.We note that expectations for a larger buyback could see some disappointed with the capacity for a buyback crimped by JHGs progressive dividend policy and a likely fall in earnings in FY19E EPS following outflows and lower markets.Credit Suisse View Trading on 9.5x FY19E JHG screens as inexpensive(25%discount to Australian AMs and 10%discount to US traditional AMs),however,this result is unlikely to be a turning point.Flows look to have deteriorated even further in 4Q18E which combined with weak equity markets will likely see very cautious commentary on the outlook.Any buyback is likely to be relatively tokenistic.4 February 2019Australian Diversified Financials4Figure 2:JHG 4Q18E Result SummaryUS$in millions,unless otherwise stated4Q17A1Q18A2Q18A3Q18A4Q18Evs 3Q18vs 4Q17Dec-17Mar-18Jun-18Sep-18Dec-18P&LManagement fees498.1502.9493.5498.7469.0(6%)(6%)Performance fees33.5(3.9)13.5(6.0)2.0(133%)(94%)Standard Performance Fees42.53.921.24.612.0 US Mutual Funds(Fulcrum Fees)(9.0)(7.8)(7.7)(10.6)(10.0)Shareowner serving fees31.431.531.833.131.3(5%)(0%)Other revenue58.857.253.655.453.2(4%)(10%)Total Revenue621.8587.7592.4581.2555.5(4%)(11%)Less:Distribution costs(116.5)(117.3)(114.7)(112.3)(106.8)(5%)(8%)Adjusted Revenue505.3470.4477.7468.9448.7(4%)(11%)Compensation expense(208.8)(186.7)(206.2)(220.6)(192.9)(5%)(2%)Non comp expenses(99.9)(107.5)(96.2)(100.0)(90.5)5%4%.Marketing&advertising(9.8)(8.5)(9.5)(7.1)(9.0)27%(14%).Depreciation&amortisation(22.3)(15.4)(15.8)(20.8)(8.0)0%(2%).Investment administration(12.2)(11.4)(11.7)(12.2)(12.5)2%2%.General,administrative&occupancy(55.6)(72.2)(59.2)(59.9)(61.0)4%8%Adjusted operating expenses(425.2)(411.5)(417.1)(432.9)(283.4)(2%)(1%)Adjusted operating margin220.4188.8191.4180.5165.3(8%)(25%)Statutory operating margin196.6176.2175.3148.3140.1(6%)(29%)Interest expense0.70.70.70.8(3.2)Investment gains/(losses)(3.1)0.00.00.0(10.0)Other non-operating income/(expenses)11.0(44.8)(4.0)2.50.0 Adjusted non-operating items(1.5)(9.7)(9.9)(6.7)(13.2)97%780%Adjusted pre-tax profit218.9179.1181.5173.8152.1(13%)(31%)Tax(70.6)(37.5)(41.7)(41.3)(33.5)(19%)(53%)Non-controlling interests(0.4)2.010.16.16.0 Adjusted NPAT147.9143.6149.9138.6124.6(10%)(16%)Adjustments323.821.6(9.3)(27.4)(19.6)Reported NPAT471.7165.2140.6111.2105.0(6%)(78%)Adjusted NPAT147.9143.6149.9138.6124.6(10%)(16%)Less earnings to restricted stock(4.0)(3.6)(4.1)(3.7)(3.3)Adjusted NPAT for EPS143.9140.0145.8134.9121.3(10%)(16%)Weighted average diluted shares197.7196.9196.6195.9195.4(0%)(1%)Adjusted EPS(diluted)-cps72.871.174.268.962.1(10%)(15%)Dividend-cps32.036.036.036.036.00%13%Payout Ratio(%Adjusted EPS)44%51%49%52%58%Source:Company data,Credit Suisse estimates4 February 2019Australian Diversified Financials5Figure 3:JHG 4Q18E Result Summary(continued)US$in millions,unless otherwise stated4Q17A1Q18A2Q18A3Q18A4Q18Evs 3Q18vs 4Q17Dec-17Mar-18Jun-18Sep-18Dec-18Fee margins:Gross management fee margin0.545%0.542%0.535%0.529%0.526%(0.004%)(0.019%)Net management fee margin0.449%0.449%0.447%0.441%0.437%(0.004%)(0.012%)Distribution fees%Avg AuM(0.127%)(0.126%)(0.124%)(0.119%)(0.120%)(0.000%)0.008%Performance fee margin0.037%(0.004%)0.015%(0.006%)0.002%0.009%(0.034%)Operating margins&cost ratios:Adjusted operating margin43.6%40.1%40.1%38.5%36.8%(1.7%)(6.8%)Adjusted compensation ratio39.1%39.1%41.8%43.2%43.0%(0.2%)3.9%Adjusted non-comp cost ratio17.3%20.8%18.2%18.3%20.2%1.8%2.9%Tax rate32.3%20.9%23.0%23.8%22.0%(1.8%)(10.3%)Group AuM(US$bn):Opening AuM360.5370.8371.9370.1378.1 Net Sales(2.9)(2.7)(2.7)(4.3)(8.5)Market Movements13.23.80.912.3(34.0)Closing AuM370.8371.9370.1378.1335.6(11%)(10%)Average AuM365.7371.4369.1376.8356.8(5%)(2%)Net Sales%Opening AuM(0.8%)(0.7%)(0.7%)(1.2%)(2.3%)Market Movements%Opening AuM3.7%1.0%0.2%3.3%(9.0%)AuM Growth2.9%0.3%(0.5%)2.2%(11.3%)AuM(US$bn):Equities189.7190.7193.3199.2168.9(15%)(11%)Quant49.950.450.152.947.3(11%)(5%)Fixed Income80.180.076.574.571.1(4%)(11%)Multi-Asset31.631.832.634.632.3(7%)2%Alternatives19.519.017.616.915.9(6%)(19%)Total AuM370.8371.9370.1378.1335.6(11%)(10%)Net Flows(US$bn):Equities(0.7)(1.8)(1.1)(3.1)(5.4)Quant(1.6)0.3(0.8)0.0(0.5)Fixed Income0.2(0.3)(0.6)(1.6)(2.1)Multi-Asset(0.2)0.10.50.90.0 Alternatives(0.6)(1.0)(0.7)(0.5)(0.5)Total Net Flows(2.9)(2.7)(2.7)(4.3)(8.5)Source:Company data,Credit Suisse estimates4 February 2019Australian Diversified Financials6Figure 4:JHG earnings forecastsAAAAAAAEEEEEEEEFY 2014FY 2015FY 2016FY 20171Q:182Q:183Q:184Q:18FY 20181Q:192Q:193Q:194Q:19FY 2019FY 2020Revenue:Investment management fees1,736.41,828.41,746.01,861.2502.9493.5498.7469.01,964.1428.8434.6440.6441.91,746.01,772.1Management Fee0.560%0.561%0.542%0.536%0.540%0.536%0.525%0.521%0.531%0.517%0.516%0.515%0.514%0.516%0.511%Performance fees96.3141.018.284.7(3.9)13.5(6.0)2.05.6(4.5)9.0(4.5)9.09.110.7Shareowner serving fees226.2261.9113.4119.731.531.833.131.3127.729.529.728.929.1117.2116.5Other revenue133.0173.157.253.655.453.2219.453.453.754.054.3215.4219.7Total Revenues2,058.92,231.32,010.62,238.7587.7592.4581.2555.52,316.8507.4526.9519.1534.32,087.72,119.1Less:Distribution costs(350.3)(376.6)(342.1)(390.6)(117.3)(114.7)(112.3)(106.8)(451.1)(97.0)(100.2)(98.5)(101.1)(396.8)(398.3)Distribution Margin-17.0%-17.4%-20.0%-19.4%-19.3%-19.2%-19.5%-19.1%-19.0%-19.0%-18.9%-19.0%-18.8%Adjusted Revenues1,708.61,854.71,668.51,848.1470.4477.7468.9448.71,865.7410.3426.7420.6433.21,690.91,720.8Adj.Revs y/y8.6%-10.0%10.8%15.9%-0.9%3.1%-11.2%1.0%-12.8%-10.7%-10.3%-3.5%-9.4%1.8%Operating Expenses(GAAP):Operating Expenses(Adjusted):Employee compensation and benefits635.1669.6611.2644.4143.8145.0151.4144.3584.5131.9132.4130.8131.5526.6533.6Long-term incentive compensation126.6162.7166.4165.339.954.551.148.7194.244.544.744.244.4177.7180.1Total Comp Expenses761.7832.3777.6809.7183.7199.5202.5192.9778.6176.4177.1175.0175.9704.4713.8Comp Ratio ex LIPT30.8%30.0%30.4%28.8%24.5%24.5%26.0%26.0%25.2%26.0%25.1%25.2%24.6%25.2%25.2%Total Comp Ratio37.0%37.3%46.6%43.8%39.1%41.8%43.2%43.0%41.7%43.0%41.5%41.6%40.6%41.7%41.5%Total Comp Expense(w synergies)761.7832.3777.6809.7183.7199.5202.5192.9778.6176.4177.1175.0175.9704.4713.8Adjusted Total Comp Ratio(w synergies)43.8%39.1%41.8%43.2%43.0%41.7%43.0%41.5%41.6%40.6%41.7%41.5%Marketing&adverstising19.522.036.033.98.49.77.19.034.29.010.08.010.537.539.4Investment administration50.048.346.243.811.411.012.212.547.112.712.913.113.452.155.8General,adminstrative and occupancy203.0246.2209.5198.670.157.758.661.0247.464.065.065.967.3262.1281.0Depreciation and amortization33.340.930.930.28.08.48.08.032.48.18.18.18.132.332.6Total non-comp Opex inc.synergies305.8357.4322.6306.597.986.885.990.5361.193.895.995.199.2384.1408.8Total Adjusted Expenses1,100.81,230.61,131.11,116.2281.6286.3288.4283.41,139.7270.2273.0270.1275.11,088.41,122.6Non comp opex y/y16.9%-9.7%-5.0%43.5%16.7%12.0%3.8%7.6%-4.2%10.5%10.8%9.6%6.4%6.5%Adj.Exps y/y11.8%-8.1%-1.3%7.3%1.3%0.8%-0.5%2.1%-4.0%-4.6%-6.3%-2.9%-4.5%3.1%Adj Operating Income(Non-GAAP)607.8624.1537.4731.9188.8191.4180.5165.3726.0140.1153.7150.5158.1602.4598.2Adj Operating Margin(Non-GAAP)35.6%33.6%32.2%39.6%40.1%40.1%38.5%36.8%38.9%34.1%36.0%35.8%36.5%35.6%34.8%Merger Integration Synergies8596107119125125000000Non Operating Items:Adjusted non-operating itemsInterest expense(52.4)(47.8)(21.4)(16.0)(3.1)(3.2)(3.2)(3.2)(12.7)(3.2)(3.2)(3.2)(3.2)(12.8)(12.8)Other income,net33.218.9(6.4)8.5(6.6)(6.7)(3.5)(10.0)(26.8)(6.0)(6.0)(6.0)(6.0)(24.0)(24.0)Income tax provision(132.9)(132.2)(143.8)(214.7)(37.5)(41.7)(41.3)(33.5)(154.0)(28.8)(31.8)(31.1)(32.8)(124.4)(123.5)Adjusted Tax Rate22.6%22.2%28.2%29.6%20.9%23.0%23.8%22.0%22.4%22.0%22.0%22.0%22.0%22.0%22.0%Noncontrolling interests(8.7)(5.1)6.5(5.5)2.010.16.16.024.26.16.16.26.224.625.6Adjusted Net Income447.0457.9372.3504.2143.6149.9138.6124.6556.7108.2118.8116.4122.4465.8463.5 Allocations of earnings to restricted stock(21.5)(14.4)(10.0)(14.2)(3.6)(4.1)(3.7)(3.3)(14.7)(2.9)(3.2)(3.1)(3.3)(12.4)(12.4)Adjusted Net Income for EPS425.5443.5362.3490.0140.0145.8134.9121.3542.0105.3115.7113.3119.1453.3