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Ashmore loses 5% as profits disappoint ahead of FTSE 100 entry

It’s probably lucky for Ashmore it did not release its full year results a few days ago, given the market reaction to the figures.

The fund manager is set to move up from the mid-cap index to the FTSE 100, based on last Tuesday’s closing price. But a week later – and despite a 13% rise in profits to £264m – its shares have slumped 5%, down 21p to 378.9p, a decline which might have made its promotion to the leading index a little more uncertain. Part of the reason is that following recent rises, it trades at a premium to other listed fund managers.

But there is also some concerns around its performance fees. Analyst Stuart Duncan at Peel Hunt – who has a buy note on the stock – said:

With a number of the key funds having August period-ends, Ashmore has provided an update on the level of performance fees recognised in the current financial year (ie to June 2012). These amounted to £18.8m, which compares with our full year forecast of £48m and last year’s figure of £43.5m. This is lower than hoped, but reflects the challenging conditions in August.

In what are challenging and volatile market conditions, it is also difficult to gauge the impact on investor sentiment and flows in the short term. In summary, we see modest downside risk to our current pretax profit/earnings per share forecasts of £306.3m and 30.4p.

Ashmore is trading towards the top of the sector but we consider this is more than justified, given the rate of growth and continuing long-term potential from the asset class.

In the short term, the outlook looks less exciting, given pressure on forecasts and recent outperformance as the shares have held up well, partly on the recent entry to the FTSE. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds