Yesterday, the MSCI Emerging Markets Index (MXEF) rose to 1052; today City of London Investment Group (LON:CLIG) provides a detailed trading update on its results for the year to 30 June 2017. The highlights are:
* 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.
* Investment performance was positive 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; net mandate wins in FY18E totals US$125m.
* Since the 30 June 2017 the MXEF has risen 4.0% to 1052.
* Pre-tax profits are expected to have risen 45% to c £11.6m (FY16: £8.0m).
* Post-tax profits are expected to have risen 54% to £9.1m (FY16: £5.9m) which is 0.9% above our forecast of £9.0m.
* Group diluted EPS is expected to have risen 59% to 36.7p (FY16: 23.1p) which is 1.95p above our forecast of 36.0p.
* The Board intends to increase the final DPS by 1.0p to 17.0p a share.
On 18 September 2017, CLIG will report its final results alongside its Report & Accounts. The AGM will be held on 23 October 2017.
Zeus view
The increase in the final DPS confirms that City of London Investment Group is trading well. We are encouraged and have updated our forecasts to reflect the data disclosed in the trading update.
In summary, we increase our FY(June)18E EPS by 9.1% to 44.0p (previously 40.3p). We also increase our FY19E EPS forecast by 10.9% to 48.0p.
We leave our DPS forecasts unchanged until we see the full report and accounts.
Valuation
At 407p CLIG shares are trading cum 17p final DPS which yields 4.2% on its own; we expect CLIG to grow its DPS by 8% over the next twelve months. On our newly raised forecasts we expect CLIG to increase its dividend cover from 1.5x to 1.6x
