Post by
savyinvestor333 on Aug 06, 2021 8:12am
Scotia Report and Upgrade to $52.00
Strong Operational Momentum Translates Into Record EPS
OUR TAKE: Positive.
Investors reacted positively to IGM's second-quarter results that saw the company posting its highest quarterly EPS in history, rising by 29% y/y. The strong reaction to a relatively modest EPS beat versus consensus (and right in line with our estimates) demonstrates that investors are clearly looking for IGM to translate its strong operational momentum into sustainable earnings growth. IGM has now posted four consecutive quarters of y/y EPS growth, with the last two quarters showing growth in the high-20% range. We believe that maintaining this trend will be key for the stock performance over the next 12 - 24 months. Management also believes that the path to a higher share price is through higher earnings. With almost ~$600M of excess capital and a significant amount of debt capacity, the team is actively looking at options to redeploy capital through dividends, share buybacks, or potential M&A. Increasing target price to $52.00 (was $51.00) but maintaining SP Rating.
KEY POINTS Q2/21 EPS of $0.99 was right in line with our forecast and came in slightly above the Street at $0.96. Adj. Wealth & Asset Management EBITDA/sh of $1.38 was slightly ahead of our expectation of $1.36, driven by modestly higher-than-expected net management fee margin, partially offset by higher opex. Despite a 33% YTD stock rally, we believe that IGM's valuation remains discounted. We estimate that IGM trades at just 6.1x Adj Wealth & Asset Management EBITDA (NTM) representing over a 28% discount to its North American peers, 1.1x standard deviation above its historical average of 23%. IGM pre-released very strong net client inflows of $2.5B (1.0% of beg. AUM&A), down from a record print of $3.6B in Q2/20 that benefitted from very strong institutional flows, but up from last quarter's $2.2B. Investment fund net sales were very solid at $1.9B (1.1% of beg. AUM), up from $864M (0.6% of beg. AUM) in Q2/20 but slightly down from a record print of $2.3B (1.4% of beg. AUM) in Q1/21. IG Wealth posted record-high Q2 net flows and Mackenzie posted very strong investment fund net sales that were positive for a 19th consecutive quarter