Sandon Capital has called on Australian asset manager Magellan Financial Group to return at least AU$300 million to shareholders, slash costs, and renew its board, arguing these measures and others could nearly double the share price.
In a 40-slide presentation Tuesday, Sandon argued Magellan’s plan to rebuild funds under management to $100 billion is risky and said the company should instead focus on extracting more value from its existing business.
Magellan shares rose 2.4% Wednesday to close at $8.83 each, roughly 90% lower than their peak in February 2020, as the firm has suffered significant net outflows, especially from the group’s flagship Global Equities fund. The exit of Magellan co-founder and Chief Investment Officer Hamish Douglass last year further eroded investor faith.
‘‘Sandon Capital considers Magellan to be deeply undervalued and misunderstood by the market. Magellan shares trade at a significant discount to their intrinsic value as well as a substantial discount to its peers,’’ said the activist on a dedicated page on its website.
The activist contended Magellan can prop up its share price above AU$15 by improving the investment performance of its assets under management, which stood at AU$41.4 billion as of May 31, as part of a broader push to regain investor confidence.
Sandon made the case for several initiatives, including a AU$300 million shareholder return before the end of 2023 and a review of the cost base to ensure annual expenses do not go above AU$100 million, excluding staff cash retention payments.
The activist said Magellan’s current costs guidance of AU$125-130 million combined with the decline in funds under management suggests the FY23 cost-to-income ratio will likely reach 35%-40%, ‘’significantly’’ impacting the asset manager’s earnings capacity.
The investment firm also told Magellan to add new directors with expertise in funds management and suggested the company name at least one more female board member to improve diversity, adding that such changes in the boardroom would be ‘‘good for culture, deliberations and decision-making.’’
Sandon, which owns a stake of about 1%, said it wanted to wait for Magellan’s full year results to be published in August before determining its next step.