Emerging markets specialist asset manager Ashmore (ASHM) has reported full year results revealing a 26% hike in assets under management (AUM) to $73.9bn.
Shares in the company rose roughly 3% to 353.6p, although the stock has declined nearly 20% since January highs.
Emerging markets have been subject to negative investor sentiment for some time. Some of this is due to specific risks associated with some countries, Turkey, which suffered a currency meltdown, is a good example. Argentina another.
But there are also macro issues at stake, a strengthening dollar weighing heavily on emerging market debt, for example, and the ongoing trade war rhetoric and the possible impact political maneuvering may exert.
Ashmore, understandably, plays down perceived threats to emerging markets. For example, the company says that the majority of emerging market debt is denominated in local currencies so is less sensitive to a strengthening greenback.
Ashmore’s currency exposure, held mainly via bonds, has increased 3.3% versus the benchmark 's 2.2% return, although quite why they flag a three year period rather than for the last 12 months is not clear.
FROM VULNERABILITY TO RESILIENCE
Ashmore believes that economic reforms and greater diversity have made emerging markets stronger over the years, and is now worth $5trn of trade between emerging market nations.
While there has undoubtedly been increased volatility across emerging markets this year Ashmore warns investors not to confuse that with increased risk. The company goes on to add that ‘weaker asset prices typically present extremely attractive investment opportunities’.
The results for its year ending 30 June show modest beats on the company compiled consensus, albeit the period closing ahead of the worst of the recent emerging markets shake-out.
This includes adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of £184m coming in 2% ahead of market forecasts. That implies a 66% EBITDA margin.
Net revenue of £276.3m was, give or take, in line with market predictions. Performance fees ran up to £22m.
Gurjit Kambo, analyst at investment bank JP Morgan Cazenove, says ‘Ashmore is a recognised leader in the management of emerging market debt, an asset class that we believe will deliver superior rates of growth over the medium term’.
However, using JP Morgan’s forecasts, Ashmore trades on 15.1-times 2019’s 23.6p of earnings while paying a prospective dividend yield of 4.7%. The shares are trading on a premium compared to the asset management sector which is 13.5-times earnings.
