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Prescient Share Analysis (PCT) |
27 March 2014. In December I mentioned that I liked Prescient, but that it was "on the cusp of acceptability" when it comes to offering sufficient value and that I was in 2 minds whether to invest or not.
What sparked my interest in the company is the buying spree of Prescient shares that Guy Toms has been on. Guy Toms is a man who knows what he is doing. He is Prescient's chief investment officer - a man who not only has an intimate knowledge of Prescient, but who also knows how to spot a good investment.
I still think Prescient is only on the cusp, but this time just on the inside of the cusp rather than the outside, and I took a nibble at 75c. It does comfort me somewhat that I'm buying at a cheaper price than an uber-smart investor like Guy Toms. The 75c I bought at is also the 52-week low for Prescient. But Guy Toms could be wrong, and so could I! It's also a bit scary that the low has been reached 4 days before their year-end! (hope that nobody knows more than me)
I couldn't get hold of the details of the company I need to carry out an accurate analysis, but my feel is that on aggregate the movements in macro-economics variables (exchange rates and markets) will have assisted the company - both in growing its AuM (even though it doesn't have much in equity as other asset managers) and improving the competitive position of the IT business.
Here's the timeline for Guy Toms:
14 Feb 2014 : R122k at 80c (including for family members)
9 Dec 2013 : R48k at 81c and R505k at 82c
5 Dec 2013 : R134k at 80c
3 Dec 2013 : R250k at 80c
On 7 Feb 2014 Herman Steyn, the CEO bought R8k at 80c a share (peanuts).
In the 6 months to 30 Sep 2013 Prescient generated a profit of R59m before tax from financial services and R19m before tax from IT services.
Prescient Ireland, which was sold on the 15th November 2013 subject to regulatory approval, had a loss of R38m. Prescient Ireland was previously known as AIB Asset Management Holdings, and was bought by Prescient in May 2012 for R72m (10.5132 exchange rate) with a contingent amount of R17m (when announcing 31 March 2013 results, management of Prescient believed the contingent consideration would be R2.3m) - so about 7m Euros. AIB Investment Management managed the assets for a variety of clients including pension, corporate, charity and private clients both in Ireland and overseas. The AuM of Prescient Ireland was 4.8bn Euros at 31 March 2013. In the 4 months to 30 Sep 2012 Prescient Ireland contributed R50m to total revenue and R4m to profit before tax - if they carried on at that rate for a year, they would have been contributing R150m p.a. (about 14.5m Euros then).
Prescient Ireland is being sold for 2.9m Euros plus repayment of the 125,000 Euros statutory cash, plus, for 5 years after completion:
50% of the revenue from pension clients greater then 0.8m Euros but less than 1m Euros p.a.
70% of the revenue from pension clients greater than 1m Euros but less than 2.1m Euros p.a.
80% of the revenue from pension clients greater than 2.1m Euros p.a.
At 30 September 2013 Prescient had local assets under management of R58bn (compared to R60bn at 31 March 2013). Prescient reported that most portfolios were ahead of their benchmarks in the most recent 6 months. It's disappointing that the AuM fell.
Prescient's assets under administration grew from R12bn at 30 Sep 2012 to R18bn at 30 Sep 2013. Significantly, a contract was signed with RE:CM to administer all their portfolios, and this will happen in the next financial period (presumably meaning in the 6 months to 31 March 2014). Prescient didn't say so, but I think this will more than double the asset base of the administration business, and my guess is that RE:CM got a really good deal (so wont double profit on the administration business!).
Stadia Fund Management had 3rd party AuA at 30 Sep 2013 of 279m Euros, and 1.1bn Euros of Prescient Ireland unit trust money.
It is a bit of a concern that the IT Services business is facing increasingly competitive markets.
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