Opportunistic Buy for CI Investments

September 24, 2018

 

Current Price $20.67 (9-21-2018)

 

Average Analyst Target Price $24.50

 

Most of my clients will be familiar with CI investments since their CORE position is CI Signature Global Income and Growth.  They may also hold are variety of other Signature fixed income portfolios

 

The stock price in early 2015 was in the $31 range.  Since that time we have seen significant volatility in the share price as most asset managers have been facing significant head winds the most significant of which is pressure on fees.  You have to be huge to survive let alone thrive and CI Investments meets that requirement.  Increasing assets should continue since one of the best ways to reduce cost of ownership for investors is to have larger positions with fewer firms.  Being one of  the largest they should be able to attract more assets to reduce fees.  Increasing assets will help overcome lower fees/ client.

 

This is SUGGESTED as a TRADE and not a long term hold (1 year target return would be 16%+)

 

CI Investments (comments below from Canaccord Genuity)

 

Recall, CI recently reduced its dividend by 50% to provide more capital flexibility. In particular, CI announced a capital allocation plan to repurchase up to $1B in CIX stock over the next 12-18 months to take advantage of a depressed share price. In Aug/18, CI repurchased 6M shares alone through its NCIB. CI has a strong track record of asset growth complemented by acquisitions. Over the past three years, CI made four strategic acquisitions: (1) First Asset (2015; AUM more than doubled since transaction to >$5B); (2) Grant Samuel Funds Management (2016; AUM of <$6B with positive flow traction specifically at retail); (3) BBS Securities (2017; two primary subsidiaries through Virtual brokers entailing $1B in client assets and Wealth Connect targeting nine managed portfolios utilizing First Asset ETFs); and (4) Sentry (2017; added scale to core retail investment platform and contributed 4.5c to EPS YTD as of Q2/18). a current run rate, CI generates $650M in FCF annually (implying FCF yield of 12%). With CIX’s declining stock price, the firm has potentially more leverage available for M&A opportunities. At CIX’s current stock price, maxing out its current NCIB of $25M shares (from Jun/18 to Jun/19) would require > $500M of cash, leaving the balance of annual FCF almost covering its reduced dividend requirements of $180M. We believe the main areas of acquisition interest include: (1) Assante Wealth Management ($45B in AUA with strong penetration into CI products at 60%); (2) adding scale at Institutional / HNW) (3) potential bolt-on transactions in Australia medium-term; (4) alternative capabilities (e.g. real estate, infrastructure, distressed debt); and (5) seeking global strategic partnerships (i.e. potential to manage assets on other platforms).

Please reply with interest so I can review your account and determine suitability

 

Disclaimer:

The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Argosy nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity futures contracts. The securities mentioned in this report may not be suitable for all investors nor eligible for sale in some jurisdictions. This research and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without the prior express consent of Argosy.

 

‘historical analysis does not reflect future returns’

 

 

 

Share on Facebook
Share on Twitter
Please reload

Featured Posts

Alternative Strategies for Diversified Portfolios

August 11, 2017

1/7
Please reload

Recent Posts
Please reload

Archive
Please reload

Search By Tags