City of London Investment

21 October 2022
By Maynard Paton

Results summary for City of London Investment (CLIG):

• Rough market conditions causing funds under management (FuM) to fall 17% to $9.2b led to H2 net fee income dropping 5% and H2 profit diving 20%.

• A post-year update showed FuM sliding a further 8% to $8.5b, but also the fourth consecutive quarter of net FuM inflows that may signal clients re-appraising CLIG’s ‘value’ approach.

• Buying SPACs at discounts to cash helped merger partner KIM outperform the original CLIM division with 6% five-year annualised returns versus 3-4%.

• Revenue “100%” denominated in the stronger USD, handy cash conversion plus net funds and investments of £30m counterbalanced an H2 margin squeezed to ‘only’ 42%.

• Near-term earnings could now be running at 36p per share, which should still support the 33p per share dividend and 8%-plus yield at 400p. I continue to hold.

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19 June 2022
By Maynard Paton

Results summary for City of London Investment (CLIG):

• The Karpus merger ensured impressive headline progress, but this H1 performance was almost identical to the preceding H2 as funds under management (FuM) remained at $11b.

• Wishful thinking perhaps, but two consecutive quarters of net FuM inflows following consistent FuM outflows may signal clients re-appraising CLIG’s ‘value’ approach.

• Rough market conditions during the subsequent H2 will test CLIG’s investments, with FuM dropping 13% to below $10b not indicating obvious outperformance.

• A wonderful 49% margin and net cash of £25m funding a welcome £7m special dividend suggest the accounts can survive any further market weakness.

• Although the possible P/E is 11 and the yield tops 7%, the shares have been rated modestly for years as major new clients remain extremely elusive. I continue to hold.

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24 February 2021
By Maynard Paton

Results summary for City of London Investment (CLIG):

• Very buoyant markets alongside the Karpus merger helped funds under management (FuM) reach a record $10.9b and lift the dividend by 10%.

• Client ‘rebalancing’ led to FuM withdrawals and, despite fledgling strategies attracting new money, overall fund flows remain frustratingly low. 

• Recent leadership retirements have not led to any dramatic changes and shareholder information has remained reassuringly comprehensive.

• The Karpus merger has raised the group margin to an astonishing 55%, but future bonus-pool arrangements could reduce such profitability.

• The possible P/E is 11 and near-term yield might top 7%, although the shares have been valued modestly for years and a sustained re-rating remains very elusive. I continue to hold.

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18 September 2020
By Maynard Paton

Results summary for City of London Investment (CLIG):

• Funds under management (FuM) endured a rollercoaster second half, but finished the year up 2% to lift profit by 10% and the dividend by 11%.

• FuM ‘capacity’ has become an issue, and explains CLIG’s limited past progress and probably prompted the upcoming merger. 

• The Karpus deal appears logical, but similar to CLIG the merger partner has struggled to attract new clients.

• The accounts continue to sport high margins, decent cash flow, high equity returns and net cash.

• A potential P/E of 11 and yield of 7.5% seem attractive, although the shares have been rated modestly for years. I continue to hold.

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23 March 2020
By Maynard Paton

Results summary for City of London Investment (CLIG):

• Funds under management rallied to a record level in GBP terms, lifting revenue by 11%, profit by 22% and the dividend by 11%.

• However, the market crash that followed these results has superseded a lot of the statement’s commentary and accounting.

• Profit may now be running almost 40% lower than at the start of the year and may just about cover the 28p per share full-year dividend.

• The accounts continue to sport high margins, decent cash flow and net cash — all of which ought to see the business through the present downturn.

• Although the shares have been rated modestly on a P/E basis for years, the possible yield now tops 9%. I continue to hold.

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26 July 2019
By Maynard Paton

Results summary for City of London Investment (CLIG):

• These 2019 summary figures contained no surprises, as lower funds under management (FUM) throughout the year left revenue down 6% and profit down 16%.

• FUM ironically ended the year at its highest-ever level in GBP terms (£4.2b), as client money once again trickled out of the main emerging-market funds and in to other strategies.

• The overall fee rate paid by clients slid from 80 basis points to 76 basis points.

• The accounts continue to sport high margins, a robust return on equity, decent cash flow and net cash.

• The P/E is approximately 10 and the yield tops 6%, although the shares have traded on a similar rating for years. I continue to hold.

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18 January 2019
By Maynard Paton

Results verdict on City of London Investment (CLIG):

• Monthly updates had already braced shareholders for lower funds under management — which in turn reduced first-half profit by 21%.

• Tough markets have again prompted the fund manager to cut its projections, as fee rates are trimmed and costs creep higher.

• As before, significant new clients are required to bolster earnings and support a decisive share-price re-rating.

• I am hopeful the replacement chief executive might one day re-energise the group’s marketing.

• The accounts remain cash-rich and high-margin, and the shares yield 7.5%. I continue to hold.

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01 August 2018
By Maynard Paton

Update on City of London Investment (CLIG).

Event: Trading update and shareholder presentation/summary results for the year ending 30 June 2018 published 17 July 2018.

Summary: Bumper first-half figures and subsequent monthly updates had already ensured the fund manager’s summary annual results would be positive. However, the second half did witness funds under management decline and the group’s own projections for the coming year have now been reduced. In addition, client fees have been cut once again while the main emerging-market strategy continues to underperform. I still hope that, one day, this cash-rich, high-margin business can attract meaningful new mandates to spark a share-price re-rating.  Until then, a 6.8% income remains available. I continue to hold.

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