Coronation soars on market rebound

Johannesburg - Headline earnings at asset management group Coronation Fund Managers [JSE:CML] have surged by 221% on the back of stronger equity markets and performance fees income.

Coronation's interim results for the period to end-March was in line with guidance provided by its management in a recent trading update.

Revenue increased by 80% to R655m, with assets under management reaching R176bn.

Commenting on the group's performance, CEO Hugo Nelson said he expected markets to remain fickle, but that the situation would continue to offer opportunities for patient long-term investors.

"We are extremely pleased with our performance during this period but, while markets have strongly rebounded, we expect continued volatility," Nelson said.

Stockbrokerage Barnard Jacobs Mellet commented that Coronation did "incredibly well" but lamented the fact that the company did not split its reporting of basic and performance fees.

BJM said it would have been useful to calculate to what extent Coronation's performance was driven by improving equity markets in comparison to new assets undermanagement. The latter would indicate a higher fee base.

Analysts at Credit Suisse Standard Securities said Coronation's strong investment performance would continue to assist the firm in acquiring new mandates.

"In our recent report we showed that Coronation continues to show strong investment performance, ranking three on a 12-month and 36-month basis as at February 2010. Consequently, we expect this to continue working in its favour in as far as winning and retaining mandates is concerned. A sustained improvement in the JSE All-share Index should also be a key factor in the sustainability of solid operational performance in our view."

Credit Suisse said Coronation trades on a price-to-earnings multiple of 8.9 times, which in comparison to international peers represents a 48% discount.

Coronation also saw some demand from unit trust fund managers in the first quarter of 2010. Funds were net buyers of the shares, adding 826 000 shares to their portfolio, with Nedgroup Investments and Stanlib being buyers.

Shares in Coronation opened down 1.8% (20c) at 1 100c a share on Thursday.