29 Oct Share of the month – Coronation
Coronation Fund Managers was founded in Cape Town, South Africa in 1993. The company is an investment-led, owner-managed business, with staff ownership of 24%. The company is also an active investment manager with a long-term valuation-driven investment approach.
Because of the JSE going mostly sideways or down and the fact that they are value investors, Coronation lost out on performance based fees which contributed a lot to profits over the last 5 years. The share price declined more than 40% this year alone, but has since started to recover. The chart below compares Coronation to the FINI 15 Index. It is an understatement to say that Coronation underperformed.
But, that decline might be overdone. Coronation recently warned in their trading update that their expected profit (diluted HEPS) is expected to be between 5% and 15% lower. Using the mid-point of the trading update, Coronation will be on a 14 PE and 7.1% dividend yield which is not expensive. Renier de Bruin of Sanlam Private Wealth puts the current intrinsic value of Coronation conservatively at R86, based on about 5% p.a. market returns on AUM over the next 3 years. This leaves room for some upside still.
– Gerhard Lampen
Head Sanlam iTrade Online