FTSE 250-listed hedge fund firm Man Group (LSE: EMG) saw its funds under management (FUM) rise by 10% to $88.7bn during the first quarter of 2017. The news pushed the group’s share price up by more than 5% when markets opened on Thursday.
The increase in FUM was particularly impressive because it was made up of both net inflows from customers and investment gains. This combination could mean that the group’s income from management fees rises sharply this year.
Chief executive Luke Ellis said the group sees “continued near-term interest from clients.” However, Mr Ellis was also keen to reminder investors that “this is only one quarter.” Flows in and out of Man Group’s funds can be quite lumpy due to the institutional nature of its business.
Man, I need to buy some
Is Man Group a buy after today’s news? The group’s shares have already risen 25% so far in 2017. But they are still worth 6% less than a year ago, despite an ongoing $100m share buyback programme.
Man’s trend-following trading algorithms have had a hard time finding profits at times over the last few years. Although the firm has diversified into more conventional fund management, so-called quant products still control almost half of the group’s funds.
Trading appears to be strong at the moment. Man is expected to deliver earnings of 15 cents per share for 2017, with an expected dividend of 8.9 cents per share. That gives the stock a forecast P/E of 12.6 and a prospective yield of 4.8%. I think there’s a good chance Man Group could beat the market from here.
An unlikely champion
If you’re a fan of fantasy gaming, you’ll probably know all about Games Workshop Group (LSE: GAW). If not, then you may be surprised at the scale of its operations. These include more than 1,500 employees, 2016 sales of £118m and a market cap of £315m.
The company’s main Warhammer franchise may revolve around a fantasy world, but Games Workshop’s financial success is very real. Sales performance has been fairly flat over the last few years, but the current year has seen a significant increase following a “new approach to marketing and merchandising”. Sales for the six months to 27 November rose 28.2% to £70.9m, or by 13% at constant exchange rates.
This has resulted in a big increase in profit and cash generation. Games Workshop reported a pre-tax profit of £13.8m for the first half, up from £6.2m for the same period last year. Cash generated from operations rose from £8.6m to £19.6m, demonstrating the solidity of the group’s profits.
The shares have performed strongly and are up 39% so far this year. Guidance for the full year was upgraded in January, and earnings are expected to reach 67p per share, up by more than 50% from 42.1p in 2016.
Games Workshop shares now trade on a forecast P/E of 14.5, with a prospective yield of 5.6%. The long-term outlook seems unclear to me, but this company has beaten expectations so far and may continue to do so. A potential income buy.
