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In reply to: tombeet on Monday 31/01/05 04:20pm

Hi Tom


I know a very smart lady that works for these guys, and she gave me the tip to get in when the were under $4.

If only I'd followed her advice http://www.ShareScene.com/html/emoticons/sad.gif



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I have talked about a few in the financial sector that have puffed up prices .....

well here is one at the other end.


In the last few weeks IFL has drifted off by around 10% as one large shareholder reduced his stake.


IOOF is one of Australia's oldest financial services institutions, having been

founded as a mutual society in 1846. It was floated late 2003 and has performed well above the prospectus indications.


In effect IFL is a fund manager both retail and wholesale. Every dollar it has under funds management it earns a percentage in fee's. Last year 2004-05 it averaged around 18 billion funds under management.


This year it would appear that total has grown to 23.9 billion currently under management as of the end of September and as of speaking to them last week the total appears even larger than this . For the first 6 months of the year the increase over last years average is around 33%.


Now how they earn their income is by a flat fee ... and a performance based fee as well and of course for the home grown customers as opposed to wholesale they receive other fees on to of this. On the performance side and looking at the results up to date Ioof/Perrenial funds are performing in the top 20% over 12 months with for example their vanilla Australian shares returning 18.7% for the 12 months and and even better performance relative to the competition of 19.76% over three years.


So in terms of the bonus paid I dont see any probs there, as to funds under management they are growing so I am told as opposed to shrinking.


Last year the company made ... with 18 billion under management a profit of 65.5 mio.

Market cap with 64.5 million shares is around $432- million. Making it should it achieve a similar result a P/E of 6.6 for this year.


Now as I said the numbers appear to be even better .... funds under management grew by 1.5 billion in the last 3 months reported or an annualized rate of over 25%. The funds under management even for the whole year worst case seem they will be 133% of last years funds and even the bare bones cash earnings and profits if they were to earn nothing else ... no bonus or other fees to me puts them worst case with a P/E of 8.

But to me things seem to be going even better than last year ... best case maybe even a profit of 75-80 mio or a p/e of 5 !!


Stock is lightly traded .... even the slide this last week was done on volume nothing out of the ordinary.


Basically some of those puffed up financials were sold back to more realistic levels.

PPT which is a good company was ahead of itself and sold off 10% in recent weeks. But its a big difference for me IFL which is smaller ... but had an excellent P/e and improving outlook was sold off with PPT by about the same amount.


Even here PPT ... p/e of 20.8 .... IFL P/e of 6.57 ....

and IFL's growth rate is twice PPT's it would appear for this year.


Anyone out there with some ideas on this one ?


Anyone heard anything ?


Always scratch my head when stocks with better than the packs numbers and even better outlooks are sold off as hard if not harder than the leaders with the puffed up P/E's .



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What you have missed is that there was a large one off profit booked last year due to the introduction of the new accounting standards and recognition of assets.


Consensus earnings forecasts for 2006 are about 35cps which puts IFL on a forward PE ratio of about 19, roughly equivalent to PPT.

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In reply to: dee27 on Sunday 11/12/05 12:23pm



Intersing view.


Cash earnings which are the cornerstone of the company which come hail rain or shine were 35 odd million net profit for 2005. Not effected by any accounting change or likely to be.


First half was 15.5 million and second half 19.5 million.


Growth reflects the funds under management which on average was 18 billion last year.


This 6 months it is going to average 23 billion under management.


Now I too saw the consensus stuff then pulled it apart .... a total of 6 brokers cover IFL and one idiot has earnings numbers from the prospectus from 2 years ago in their as his estimate. Another has not updated the estimate for 14 months. Only 4 out of the 6 provide forward estimates ... and when 2 are older than week old fish ....


If the profit booked second half on average funds under management 2005 was 19.5 million profit from 20 billion under management .... and this 6 month average for IFL appear to be 23 billion under management .... 15% higher ... the rock bottom earnings to me appear to be of the order of 22.4 mio for the first half.


I did look at the consensus ... dont get me wrong ..... there yes were some one offs last year ..... but even the year before if you look the company made a net profit of $41.6 million with and average funds under management of 14 billion .... at the end of this year it was JUne 2004. Not effected by anything then.


So being blunt the consensus is rubbish as far as I can see. Year one profit 41.6 mio 2004.

Year 2 profit $65.4 mio ..... 2005 year that is.


Now to suggest as the consensus seems to profit is going to be $20- mio ish with twice as much under management as the average year one ... fascinating.


In fact at the AGM the cornerstone underlying earnings the MD and baord affirmed earnings estimates from the NET cash earnings to top the 40 mio mark alone for 2005-6.


Thats .... 62 cents per share ... and its before other earnings based or performance against benchmarks. From what I can see ... they are doing very nicely there as well.


Was there a large profit booked year one as well ? I dont think so .....


The cornerstone of the business is the underlying net cash earnings and bottom line this base appears to me to be $40- mio plus in 2005/06. Thats a base !!!


Maybe you can fill in some of the gaps but I too looked at in particular two of the earnings estimates and found them lacking ... two which make up 4 of the total that estimate future earnings ... not all 6 brokers that cover IFL provide forward estimates ....


Now on top of this base ... they earn performance fees ect ect.

Net profit will be even larger than this.


Here is something current ...


"The analysts consensus is for IOOF to achieve $40 million in cash earnings for 2005-06 compared with the previous year's $34.9 million"


Doesn't take into account the gravy even !!







Maybe I am wrong ? It happens ... but I cannot see anything likely to topple this apple cart over and shall eagerly await the financials in Feb 2006 and annoucement about how much they have under management as of the end of Dec


Anyhow will be punished by the market is wrong but I just love journo's calling IOOF a boutique funds manger when it has 23.9 billion under management.


Hope the guy low ticking it keeps going ... lowtick on the close ...


All the best

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Oh >>> I forgot.


IOOF or IFL has $23.9 billion under management as of 30/9/05


Interestingly PPT perpetual ... it is in the same business to a large extent but also has income from other areas ... wills ect ect ....


It has $ 29.4 billion under management.


Hardly what I would call a small manager IFL ...


Estimated earnings ... after the changes in the accounting policies you talked about for PPT in 2006 are UP 15.9% Est 2007 up 10% and 2008 up 9%.


They are in virutally the same business ...


Difference being 9 brokers cover PPT and their estimates are current not 2 years out of date.


Bottom line IFL ... Ioof has been growing at a rate about 135% of PPT. PPT 12 months ago had 23 billion under management now it has 29.4billio a growth of 27.82% ... IFL 12 months ago 17.4 and now 23.9 billion growth of 37.35%.



What attracts me to IFL is this. In the race for funds under management it is even beating the darling of the market PPT. PPT shares are up 20% in the last 12 months.

IFL in comparison despite growing even quicker than PPT is down by 20% in terms of share price despite the results.


Now certainly for both IFL when it was at its highs 12 months ago it had some growth factor built into its prices and PPT even here has the same ... but reality is for me even with out performing PPT ... IFL has slid the other side. Longer term does this keep up ? I know one is priced incorrectly in relation to the other .... either IFL plays catchup ... or maybe you are correct about earnings but I see nothing to suggest this and shall speak to them on Monday just to confirm it .....


Will be interesting as always to hear the companies comments ... but in my eyes the recent slide in PPT off its puffed up inflated price was exactly reflected in IFL's price yet comparitive performance IFL down here stands head and shoulders above PPT.


I could be wrong .... do your own research ... however after reading both annual reports and all releases for the company in 18 months ... this was my conclusion.



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In reply to: kahuna1 on Sunday 11/12/05 02:48pm



they probably are a company that's under-researched and misunderstood by the market and analysts. I know that Erik Metanomski, one of the shrewdest value managers around, bought them at around $3 to $4 after the float and then sold out at around $8.


I agree they're better vaue than PPT and if they fall any further will be definitely worth taking a look at.


Cheers Dee


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QUOTE (dee27 @ Sunday 11/12/05 03:32pm)

Hi Dee ...


Just been going even further ....


Happy about my earnings call bottom line.

It appears under 10 p/e ... well under.


About the accounting adjustment and mark to market stuff you mentioned .... some fun and games went on with a few shares around the 30th June this year.


Prices fell by 10 % for a few with little of no reason behind them ... the overall market in the leadup to 30/6 was flat the index the two weeks before it ... but if one looks at IFL's reported substantial holdings and then the price of the shares in the week leading up to 30/6/2005 some fell by a whopping 10% ... no reason and they bounced back in following days .... one which I think in terms of numbers is IFL's largest hold fell 5.7% in the week up to 30/6 .... PBL ... IFL holds 42.8 million shares .... so on the 21/6 PBL $15.75 .... no announcement ... but by the 30/6 close $14.85 ... or down 5.7% for the largest IFL held stock i think .... and a week later back to where it started.


Right now ... PBL is up from that $14.85 low driven to on the 30/6 ... to $16.50 in relation to profits and marked to market this one share in the week leading up to 30/6 went down by $38.5 mio in relation to IFL's holdings and the requirements of it being market to market on its overall holdings. I suppose this one share accounted for 5% of the total holdings of IFL funds under management on the ASX being market to market for the first time. So the rebound to where it is now .... in dollars and cents is $70.6 million more.


Marking to market shares when you have $20 billion funds undermanagement as opposed to returns to unit holers is one thing but clearly there seems to me to be a massive as yet pool of as yet to be declared profits over and above the Net cash earnings of the company so when I say the bottom line ... is 40 mio net profit .... just from the 1-1.8 % they charge for funds under management ... well it appears there certainly is a lot more to go if IFL could just watch one shares valuation drop by $38.5 mio in the week leading up to reval time suggests there is .... piles more sitting out there .... no share I can identify as a substantial holding was run up prior to the 30/6/2005 and the opposite in fact seems to have been the case virtually across the board. If PBL had remained flat .... the profit number for IFL would have been $38.5 million more is my reading on it. So hidden in their is some fat ....... in fact a lot of fat .... obese would be the word if this was the case across the baord ... but I suspect not.


Many thanks for ur comments ... made me look even harder.

Shall call them tommorow and see what their estimates are if they will give them and ask them about funds under management right now.



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