Platinum’s Tilt to Asia Hurts Fiscal 2016 Profit, but Can the U.S. Continue to Outperform?

After three straight years of strong profit growth, the ride came to a temporary end, with Platinum Asset Management’s fiscal 2016 profit down 6% to AUD 200.9 million. While a more subdued second-half performance was expected, the result disappointed, missing our forecast by 11%. While revenue was slightly behind our expectations, down 4.4%, costs growth of 6.3% was higher than expected. While we can appreciate staff incentives are required to reward, retain, and motivate good people for positive contributions, in a tough period for the group, we had hoped for greater cost constraint. We do not see investments in the business as wasteful and they should bear fruit in the future, particularly the seeding of three UCITS (mutual funds based in the European Union) to attract offshore institutional money. The final fully franked dividend of AUD 16 cents per share takes full-year distributions to AUD 32 cents, down from AUD 37 cents last year which is a result of lower earnings and Platinum lowering the payout ratio to 93%.