Ashmore Group going south

The group will announce its first-quarter results on 15 October, and despite the slowdown in emerging markets the fund manager is seeing profits.

London Stock Exchange
Source: Bloomberg

The company is focused on investing in emerging markets, and even though there has been a major selloff in the stock markets of emerging economies, the company has actually seen profits rise. The financial upheaval in Asia and Latin America has prompted clients to withdraw funds, and Ashmore witnessed a 21% drop in annual funds under management, but net profits increased by 6%.

Ashmore is relatively protected from volatile movements in emerging market currencies as the majority of its fees are in US dollars, and the strength of the greenback helped the asset manager register a profit. Performance fees went up more than fourfold last year, and this underpins how good Ashmore is at fund management.

A major jump in performance-based revenue in an era when many stock markets of emerging economies are coming off the boil highlights its success. One problem on the horizon is a major exodus of cash from its funds may catch up with it in quarters to come. The mood is switching when it comes to emerging markets – and with the possibility a rate rise in the US and additional QE from the ECB – more money could flow back into developed markets.

Ashmore will announce its first-half figures in February 2016, and dealers are anticipating revenue of £111 million, which compares with the second-half revenue from last year of £123 million. The fund manager will report its full-year figures in August 2016, and the market is anticipating revenue of £228 million, and adjusted net income of £117 million. These estimations equate to a 15% drop in revenue and a 7.1% fall in adjusted net income.

Equity analysts are a touch on the bearish side when it comes to Ashmore, and out of the 17 ratings, four are buys, eight are holds, and five are sells. The average target price is 279p, which is 4.5% above the current price. Investment banks are bullish on Jupiter Fund Management, and out of the 17 ratings, nine are buys, six are holds, and two are sells. The average target price is 474p, which is 10% above the current price.

Ashmore’s stock has been sliding since May 2013, and should it continue falling 273p will be initial target, and a move below it will bring 237p into play. Should the stock move higher, 320p will act as resistance.

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