This FY will be an interesting one. After a three-four years of having the shareholder hand brake on due to unit pricing blunders, management fee reductions and recent staff blow-outs, there MAY be some significant indicators that point to a better year for the owners. Here are some things to consider.
1. No mention of fee reductions....wouldn’t be surprised if they surprise us with one announcement near Christmas, or the quiet period just after Xmas. Might keep second half of year profit subdued. Let’s hope reduction is very mild.
2. Inflows stabilised around $400M a year, which adds about $5.2M to revenue
3. Staff recruitment at present has stopped. Always watching industry moves website for any changes. Assume annual 5% jump in expenses each year if no new bods at aef. That was the previous increases before things went silly. Current expenses for fy18 is about $29-30M , so at least an extra $1.5M for FY19 (the bare minimum).
4. The All Ords currently on a gentle trend up and property/housing is finally been seen as reasonably risky and low return prospects compared to equities. If All Ords climbs 10% then another $250M to FUM (could be higher but assume some investments are diluted with cash interest rates for low growth options). So that’s potentially another $3M to revenue.
5. Never expect institution inflows. Maybe if we get critical mass (FUM) then they might occur every couple of blue moons.
So the previous three to four years was reasonable for shareholders but most know we could have done far better. I’m supportive of fee reductions, but really need better justification for new staff and their benefits to the company. This year I want the hand brake on expenses and the management to think more towards shareholders....we own the company, give us preference this year.
AEF Price at posting:
$154.00 Sentiment: Buy Disclosure: Held
