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Patricia Perez-Coutts, senior vice-president, AGF Funds Inc.
Patricia Perez-Coutts, senior vice-president, AGF Funds Inc.

AGF selloff overwrought, say analysts Add to ...

The analyst community isn’t exactly in love with AGF Management Ltd, but even some of the skeptics think that the selloff in the mutual fund company’s shares has been overdone since a key portfolio manager left.

AGF is losing Patricia Perez-Coutts, who runs the emerging markets stocks at AGF, perhaps the company’s most successful fund group.

The analysts expect the departure to hit AGF’s bottom line as investors who liked her move money out. But the decline in the stock is overwrought, argues Barclays Capital analyst John Aiken, who has an underweight target on AGF.

“Ultimately, AGF will likely incur some AUM declines from the departure, but the implied $5-billion in lost AUM appears to be too conservative at this juncture, particularly when retail mutual funds remain sticky and the amount of institutional AUM at risk remains unknown,” Barclay’s Capital analyst John Aiken wrote in a note to clients. He has a $15 target on the stock.

Over at GMP, Stephen Boland, who is a bull on the stock, agrees.

“We believe the selloff in the market for the past two days is an overreaction,” Mr. Boland wrote. “We estimate that the investment management operation is being valued below 5.0x which has only occurred twice in the past 10 years. Also, on free cash flow basis, AGF is now trading at an 8 year low. Finally, as a percentage of assets under management, AGF is trading at 2.2 per cent, well below most precedent values.”

He cut his target to $15.50, which still represents substantial upside from the current levels.

The average analyst target price is $16.02, according to figures from Bloomberg. There are six holds, three sells and 2 buys on the stock.

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