Question 1. What is your opinion of Platinum Asset Management (PTM) right now at around $4.80, and specifically its business long term in Asia? Its share price has come down from over $5 (even though markets generally in Asia are up this year) but it still has a 6% dividend yield.
Answer: I am always amazed at the interest by our subscribers in funds management businesses like Platinum (PTM), which seems disproportionate to the importance of the sector. Putting that to one side, I think headwinds like pressure on fees and funds outflow arising from indifferent performance means that Platinum might continue to do it fairly tough.
As for the brokers, the consensus target price is $4.43, about 8.8% lower than the last closing price of $4.86. This is impacted by one broker with a target price of $3.40, but even so, the highest is only $4.85.
On multiples, it is trading on 18 times forecast FY19 and 17.3 times forecast FY20 earnings, materially cheaper than Magellan (MFG). But it is also quite a bit more expensive than Janus Henderson (JHG) or Pendal (PDL). The dividend yield of a forecast 5.6% is quite attractive.
Bottom line? Not a buyer.
Question 2. Do companies have the option to pay dividends in franked or unfranked forms?
Answer: Potentially yes, if they have the franking credits. They can choose to frank the dividend or leave it unfranked. Remember, franking credits are absolutely no value to the company – they are only of value in the hands of shareholders. Franking credits represent the company tax paid to the Australian Taxation Office – for each dollar of tax they pay, they get $1 of franking credits. Accordingly, if a company has the available franking credits, 99.99% of the time it will frank the dividend.
Question 3. With regards to the share portfolios (both growth and income) as published in your latest Report, do you plan to sell any shares that are performing well ( 5% gain) to make a profit, or do you suggest just a hold-and-watch position?
Answer: It is a model – and I try to keep changes within a 12 month period to an absolute minimum – usually just killing off the clear mistakes. That said, there are some stocks (more so in the income portfolio) that have had terrific runs and I would be mindful of that at these levels. These include Dexus (DXS), Transurban (TCL) and Woolworths (WOW).
I update my thoughts at the start of the month.
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