Ccord's Summing tune
PROPREITARY PLATFORM EXCEEDING OUR EXPECTATIONS We maintain our BUY rating and target price of C$1.35/sh. AHF stock is down 23% QTD, which can only be explained by Ben Cheng’s distribution agreement with IA Clarington and extension beyond February 7, 2015. We believe the market has now priced no extension and loss of full assets to AHF. If this was the case, we believe Aston Hill could potentially benefit midto long term from assets moving over. Using our calculations, it would take <$0.8 billion (from $2.5 billion) in assets gathered by mr. cheng on aston hill’s proprietary platform (no easy task) to make the financial impact neutral. we estimate ~$6.5 million in annual revenue would be lost (and declining since there are net redemptions on mr. cheng’s tactical funds) or ~$4 million in ebitda. deducting $4 million of ebitda from our 2015 estimate leaves us with $12 million ebitda and a $0.94/sh. target price (higher than friday’s close of $0.89/sh.). essentially, we believe investors get a free call option on future assets managed by mr. cheng (whether it remains on ia clarington’s platform or moves over to aston hill). that said, we could see the stock have further near-term pressure if the contract is not extended. for q3/14, ahf reported base ebitda of $3.1 million (+11% yoy), below our $4.0 million forecast. there were a couple of non-recurring items, specifically one-time employee compensation costs that netted $0.4 million. we calculate adj. base ebitda was closer to $3.5 million. on the positive side, aston hill’s proprietary mutual funds continue to exceed our expectations. this segment was up 7.6% qoq to $1.05 billion driven by net sales of $92 million (or 9.4% of beg. aum). the main funds continue to generate strong risk-adjusted returns. our target price is based on a sum-of-the-parts approach, derived by a: (1) 9.0x multiple applied to our ntm base management fee ebitda; and (2) net debt. billion="" (from="" $2.5="" billion)="" in="" assets="" gathered="" by="" mr.="" cheng="" on="" aston="" hill’s="" proprietary="" platform="" (no="" easy="" task)="" to="" make="" the="" financial="" impact="" neutral.="" we="" estimate="" ~$6.5="" million="" in="" annual="" revenue="" would="" be="" lost="" (and="" declining="" since="" there="" are="" net="" redemptions="" on="" mr.="" cheng’s="" tactical="" funds)="" or="" ~$4="" million="" in="" ebitda.="" deducting="" $4="" million="" of="" ebitda="" from="" our="" 2015="" estimate="" leaves="" us="" with="" $12="" million="" ebitda="" and="" a="" $0.94/sh.="" target="" price="" (higher="" than="" friday’s="" close="" of="" $0.89/sh.).="" essentially,="" we="" believe="" investors="" get="" a="" free="" call="" option="" on="" future="" assets="" managed="" by="" mr.="" cheng="" (whether="" it="" remains="" on="" ia="" clarington’s="" platform="" or="" moves="" over="" to="" aston="" hill).="" that="" said,="" we="" could="" see="" the="" stock="" have="" further="" near-term="" pressure="" if="" the="" contract="" is="" not="" extended.="" for="" q3/14,="" ahf="" reported="" base="" ebitda="" of="" $3.1="" million="" (+11%="" yoy),="" below="" our="" $4.0="" million="" forecast.="" there="" were="" a="" couple="" of="" non-recurring="" items,="" specifically="" one-time="" employee="" compensation="" costs="" that="" netted="" $0.4="" million.="" we="" calculate="" adj.="" base="" ebitda="" was="" closer="" to="" $3.5="" million.="" on="" the="" positive="" side,="" aston="" hill’s="" proprietary="" mutual="" funds="" continue="" to="" exceed="" our="" expectations.="" this="" segment="" was="" up="" 7.6%="" qoq="" to="" $1.05="" billion="" driven="" by="" net="" sales="" of="" $92="" million="" (or="" 9.4%="" of="" beg.="" aum).="" the="" main="" funds="" continue="" to="" generate="" strong="" risk-adjusted="" returns.="" our="" target="" price="" is="" based="" on="" a="" sum-of-the-parts="" approach,="" derived="" by="" a:="" (1)="" 9.0x="" multiple="" applied="" to="" our="" ntm="" base="" management="" fee="" ebitda;="" and="" (2)="" net="">