Opportunistic Buy for CI Investments
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
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‘historical analysis does not reflect future returns’