Citing its valuation, Desjardins Securities analyst Gary Ho downgraded Fiera Capital Corp. (
FSZ-T -4.68%
decrease) to “
hold” from “buy” ahead of the Aug. 11 release of its second-quarter results.
After the bell on Tuesday, the Montreal-based firm reported its preliminary estimate of assets under management for June of $157.6-billion, down 10.2 per cent from the first quarter and below Mr. Ho’s estimate of $170.3-billion.
“Private alts continue to perform well with modest 0.8-per-cent AUM growth, while public market AUM decreased $18.0-billion (down 11.4 per cent),” he said. “In 2Q, the S&P 500 depreciated 16.4 per cent (down 13.7 per cent C$-adjusted) and the S&P/TSX depreciated 13.8 per cent, while the investment-grade corporate index we follow declined 9.0 per cent (down 6.0 per cent C$-adjusted).
“For perspective, AUM was down 10.2 per cent for AGF, down 10.1 per cent for IGM and down 9.8 per cent for CI (down 20.0 per cent excluding wealth management) in 2Q.”
For the quarter, he’s now forecasting adjusted earnings per share of 29 cents, a penny higher than the consensus.
“For 2Q, we will be interested in updates on its private alt platform and capital deployment activity, as well as the outlook for 2H22,” he said. “Lastly, we will also focus on commentary around net flows activity through the StonePine sub-advisory arrangement (represents around one-third of FSZ AUM).”
With the market correction and AUM results, he lowered his full-year AUM forecast for both 2022 and 2023 by 7 per cent. His earnings per share projections slid to $1.26 and $1.32, respectively, from $1.34 and $1.43.
Mr. Ho’s target for Fiera shares fell by $1 to $10. The average on the Street is $10.57.
“While we like FSZ’s growing private alt platform (an attractive risk/return profile with steady cash flow) and attractive 9.1-per-cent yield, we view the shares as fairly valued,” he said.