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Background and overview of Coronation (CML)
Coronation Fund managers (CML) is one of the largest asset management companies in South Africa. With assets under management topping R606billion. Their basket of services includes unit trusts, retirement funds, institutional investor services etc.
Their main competitors in this market segment includes Allan Gray, Foord Asset Management, Investec, Prudential, PSG Wealth to name but a few. These companies fortunes often rely heavily on the performance of the stock markets they invest their clients money in, as they earn performance fees from these funds. The trick for these companies is to ensure annuity or recurring earnigns (not based on stock market performance) is grown over time, to make them less vulnerable against market movements.
Coronation has a fantastic track record for their various funds, and their slogan "Trust is Earned" is embedded in a lot of investors minds after numerous advertising campaigns they ran to promote their business.
We take a look at their most recent financial results and give a valuation on their shares below.
Their main competitors in this market segment includes Allan Gray, Foord Asset Management, Investec, Prudential, PSG Wealth to name but a few. These companies fortunes often rely heavily on the performance of the stock markets they invest their clients money in, as they earn performance fees from these funds. The trick for these companies is to ensure annuity or recurring earnigns (not based on stock market performance) is grown over time, to make them less vulnerable against market movements.
Coronation has a fantastic track record for their various funds, and their slogan "Trust is Earned" is embedded in a lot of investors minds after numerous advertising campaigns they ran to promote their business.
We take a look at their most recent financial results and give a valuation on their shares below.
Scroll over or click on the funnel chart to get more details of CML's latest financial results
Financial review:
While Coronations profits have been hit by market volatility, they still earn a hefty chunk of profits based on their revenues. Their net profit margin sitting at around 38.8%. This is down from the compartive period last year when they earned net profits of roughly 39.7%
The pie chart below shows the contribution of Coronations operations to their revenue and pre-tax profit earnings.
The bulk of Coronation's revenues and profits comes from their African operations. With it contributing well over 60% on both counts. It does seem like the margins earned on their international operations were a little better than the African operations their internation operations made up 32% of revenue but contributed 39% to profits.
Coronation has always been known as an extremely cash generative business, and this was once again the case. With their cash generated per share coming in at R13.70 odd per share, while earnings per share came in at R2.29 per share. Placing Coronation on a PE ratio of 14.48 (which is not a demanding PE ratio at all). Their dividend per share amounted to R2.29 per share for the half year, placing Coronation on a dividend yield of 6.8%. Below a few more financial ratios for Coronation (CML) to consider:
Coronation has always been known as an extremely cash generative business, and this was once again the case. With their cash generated per share coming in at R13.70 odd per share, while earnings per share came in at R2.29 per share. Placing Coronation on a PE ratio of 14.48 (which is not a demanding PE ratio at all). Their dividend per share amounted to R2.29 per share for the half year, placing Coronation on a dividend yield of 6.8%. Below a few more financial ratios for Coronation (CML) to consider:
A few financial ratios for Coronation (calculated using our Financial Ratios Calculator):
- Debt to Equity Ratio: 31.14 (more than 2 shows high levels of financial leverage). In Coronations's case their liaibilities is not really debt but liabilitities towards investment contracts and holders of interests in investment partnerships. So this figure should not be taken to seriously
- Return on Assets (ROA): 1.12% (Large asset base so this figure is expected to be low).
- Return on Equity (ROE): 35.88% (This figure reflects the return Coronation is providing on shareholder's funds). It's a very strong number and investors can be happy with that figure.
- Net Profit Margin: 38.90%
- Dividend Yield: 6.76% (Very strong dividend yield from Coronation). Offers a good long term income stream.
Valuation:
While the fortunes of Coronation is tied to that of the financial markets and in particular the Johannesburg Stock Exchange, we do feel the recurring nature of their income (annual management fees on money invested with them), is sufficient to cushion them against extreme market volatility. While they have a beta bigger than 1 (share price moves at greater rate than market when stock market goes up, and falls at faster rate when stock market goes down), investors should look past short term movements of Coronation and the stock market itself and look at the underlying business. Which is a very good one.
Based on Coronation's latest financial results, the performance of the stock market and future prospects of the market, we value Coronation at between R74.50 and R75.10 a share.We therefore feel that Coronation offers a good buying opportunity at it's current price and investors should look to add the share to their portfolio's. They will reward when markets go up, and in the meantime investors can enjoy a healthy dividend stream coming in.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
Based on Coronation's latest financial results, the performance of the stock market and future prospects of the market, we value Coronation at between R74.50 and R75.10 a share.We therefore feel that Coronation offers a good buying opportunity at it's current price and investors should look to add the share to their portfolio's. They will reward when markets go up, and in the meantime investors can enjoy a healthy dividend stream coming in.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.