Investec’s Ninety One Sets Stage for ‘Good Valuation’ at Listing

JOHANNESBURG(Capital Markers in Africa) – A rapid growth in assets at Investec Plc’s money-management arm is coming just as the South African and U.K. company prepares to split the unit from the bank, providing a potential valuation uplift before trading its shares separately.

The money manager, which will be named Ninety One when it lists early next year, boosted assets by 3.2 billion pounds ($4.15 billion) in the six months through September, while operating profit rose by 6.3% to 97.3 billion pounds, Investec said in a statement on Thursday. Investec’s other revenue streams, such as investment-banking fees and trading income in its specialist bank, came under pressure, causing overall operating profit to drop 1.7%.

“It’s a bit of a mixed tale. Most of the core businesses are moving in the right direction,” said Renier de Bruyn, an investment analyst at Sanlam Private Wealth in Cape Town. “On the asset management side, we have continued to see good investment inflows which set up the business for a good valuation when they come to the market next year.”

Investec is on track to spin off Ninety One by the end of the first quarter of 2020. The breakup will allow the money manager to build scale, while Investec will be left with a more focused banking unit. The firm is also on a cost-cutting drive as it contends with slow economic growth and a weak consumer environment in South Africa and political uncertainty in the U.K. It has also closed under-performing units such as its wealth business in Ireland.

“They have maintained their guidance on their 2022 targets where they still see a lot of room to improve their return on equity,” de Bruyn said. “That should hopefully underpin a better share price performance going forward. They certainly have a more shareholder- and returns-focused mindset relative to what they perhaps had under the previous management. At this stage it’s all about execution.”

What Bloomberg Intelligence says:
“Positive net inflows of new money have driven rapid growth in assets under management, supporting Investec’s revenue momentum, but this will vanish once the Asset Management division’s divestment is implemented. This puts the onus on core lending and the struggling Wealth Management business, where AUM have declined recently, and the outlook remains uncertain at best.”

Source: Bloomberg Business News