Ashmore Group PLC 

Ashmore Group PLC (LON: ASHM) is an FTSE 250 Index listed specialist investment manager for the Emerging Markets with experience of over 25 years.

The company will pay a final dividend of GBX 12.10 per share on 10 December 2021 (Ex-dividend: 4 November 2021).

Investment Rationale: SELL at GBX 340.60 

• The top-line net revenue dropped by approximately 10.25% during FY21.
• According to the reports, ASHM had a significant bond holding of around USD 400 million in China’s troubled real estate group Evergrande Group.
• From a technical standpoint, the 20-days exponential moving average of GBX 354.50 indicates a correction in the near term.
• Also, the MACD line remained lower than the signal line, suggesting a declining trend in the stock price.

Key Risks

• ASHM is exposed to the portfolio risk from Evergrande Group.
• The market volatility could impact investors sentiments and the performance of the company.
• Any unfavourable exchange rate momentum could impact the AuM of the company.
• The company operates in a highly regulated market, any noncompliance or unethical act could impact the reputation of the company.
  

Financial Highlights for the 12 months ending 30 June 2021 (reported on 3 September 2021)

(Source: LSE Website) 

• The Company achieved decent growth on the profitability front, as PBT grew by 28% to £282.50 million in FY21.
• The AuM of the company grew by 13% to USD 94.40 billion during the period.
• ASHM maintains a solid balance sheet with more than £750 million of financial resources and a Pillar II capital requirement of £156 million.
  

One Year Share Price Chart 

(Data Source: REFINITIV, Analysis done by Kalkine Group) 

Valuation Methodology: Price/Book Value Approach (FY22E) (Illustrative)  

Conclusion 

The continued focus on controlling operating costs resulted in a higher level of profitability in FY21. ASHM expects positive momentum to continue from the Emerging Markets with robust growth potential and attractive valuations. Meanwhile, ASHM has a substantial holding in the Evergrande Group. Since China’s Evergrande suspended its trading on the Hong Kong stock exchange after defaulting on coupon payments. Hence, it would be advisable to exit the position at the current level and mitigate the risk. The stock has made a 52-week low and high of GBX 334.59 and GBX 493.40, respectively. 

Based on the portfolio risk associated with Evergrande group, the decline in net revenue during FY21, and unfavourable valuation as done using the above method, we have given a "SELL” stance on Ashmore Group PLC at the current market price of GBX 340.60 (as on 04 October 2021 at 10:01 AM GMT+1), while we keep a track on the company’s next growth drivers.

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

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