marmaduke, as you know I went a bit cold on them in May after...

marmaduke, as you know I went a bit cold on them in May after the fee reductions were announced but then soon released the impact would not be as great as first thought on the bottom line, mainly because of the positive impact it's having on net inflows and the impact going forward from cost cutting. As a result of that exercise I was never able to fully get back my original holding. That said AEF is still in my top 5 holdings so it's a decent position for me.

I thought the result was very good. But even better is the fund inflows. A lot of the fund managers have grown profits simply because the market has lifted their FUM. Yet AEF are experiencing robust inflows in addition to positive market performance. For FY14 half of FUM growth was from net inflows. Consequently, AEF is in a stronger position to protect profit if the market falls, especially if these good inflows continue.

I actually think AEF is the cheapest wealth plays out there at the moment, even better than FPS At present they are cum $1.71 of gross dividend. So on a theoretical ex div price of say $41, the fully diluted market cap is $44m. They had $11m cash at balance date and made underlying NPAT of $3.1m for FY14.

Looking forward to FY15, they mention FUM was up 6.1% since June 30 which would boost Stat NPAT by appox $700k if it was maintained (this takes into account the fee reductions as at 30 June). Note Stat NPAT for FY14 was $2.54m due to a property impairment charge and redundancy costs.

If they can average $1b FUM for FY15 (already at $940m as at end of August), I estimate they can earn NPAT of around $3.7m for FY15. It's a bit hard to know the effective tax rate because it jumps around but I have assumed 35% tax and a $15m total cost base after last years cost cutting.

So potential fully diluted EPS of 345c and a DPS in the order of 290c for FY15. Forward PE of under 12. If you adjust for the $11m cash, forward PE is under 9.