Blake Goldring, CEO of AGF ManagementYvonne Berg/The Globe and Mail
AGF Management Ltd. reported a better-than-expected fourth-quarter profit on Wednesday even though redemptions in its mutual funds continued to climb.
Profit from continuing operations fell to $13-million, or 14 cents a diluted share, from $18-million, or 19 cents a share, a year earlier. The latest results exceeded consensus analysts' estimates of 12 cents a share.
"We expect AGF.B stock should react slightly positively today based on the earnings-per-share beat, and a flat institutional pipeline - two keys issues we believe investors were focusing on," Canaccord Genuity analyst Scott Chan said in a note.
But net redemptions of mutual funds was "disappointing" as they climbed to $1.15-billion compared with a forecast of $800,000, said Mr. Chan, who has a "hold" rating on AGF stock with a target of $11.50 a share. Shares at midday were up 4.4 per cent at $10.65.
Volatile markets and fund redemptions took their toll on revenue, which fell to $125-million from $138.2-million a year earlier. Total assets under management fell nearly 15 per cent to $39.2-billion.
Shares of Toronto-based AGF, which have fallen more than 30 per cent over the past year, have been under pressure amid concerns about the impact of the departure of star emerging markets manager Patricia Perez-Coutts, who left last year to join the Canadian unit of Westwood Holdings Inc. She managed assets for both retail and institutional investors.
But AGF indicated that its redemptions from institutional investors has slowed. It also intends to renew its share purchase program, which will provide support for earnings per share growth.
"We view AGF's earnings quite positively, and believe that it should relieve some of the concerns driving an overhang in its valuation," said Barclays Capital analyst John Aiken.
"The company indicated that its committed pipeline for institutional flows was postive, but modest. This is a signficant swing from the indicated $1.5-billion in committed outflows at the end of the last quarter."