They have just released an interim profit upgrade which equates to around 5cps for the first half. If they can replicate that in the second half that would give eps of 10c. At the current price of $0.48 that gives a P/E of less than 5.

On that basis, I have added some.

Regards West Wind

I have had a crack at estimating what HHL’s interim figures may be. They have been a bit slow to release their December performance reports, so I have based my figures on the 31 Dec unit prices.

I estimate that FUM at end of Dec would have been around $2.05b, giving an average for the 6 months of about $1.85m. On this basis, revenue from funds management would be around $14.8m. If expenses were similar to previous 6 months they would be around $5.0m. I assume based on AGM figures (24 Nov 09) and unit price changes since then that max performance bonus that could be expected would be $100-200k. After the contribution to charitable donations of around $500k, Cash Profit Before Tax would be $9.5m. Tax on this would be $2.85m leaving CPAT of $6.65m or 26cps.

In the financial statements, the CPBT is adjusted for a number of non cash items to give the NPAT.

HHL seems to use the CPAT to decide on the level of dividend (except for last dividend where they dipped into reserves).

On this basis, my expectation for their interim dividend this year is in the range of 22-24cps.

Regards West Wind

good points. They also said they had around 80-90c of near cash, cash and investments in the various funds. I like to take this off the share price and compare this price to the earnings.

Do you have any idea where the performance fees are? Last I heard they were negative $24m I think. At the moment I’m assuming nothing but sometime in the future they are likely to add to the profit.

I realise that there is a risk of a big fall if world markets fall again, which I think is a significant probability. To be honest I wouldn’t mind this as I could buy some more.

I view HHL as a core holding and cash generator for my investing. So unless it becomes 20%+ overvalued I’m not interested in selling. HHL at $7.50 appears undervalued. Throw in a 5-10% extra probable upside this year in earnings and dividends and FUM growth through both super guarantee and fund growth and I can see $10 by year end.

Another scenario is a final leg down in world wide markets decimating FUM via outflows and losses, leading to falling earnings 2012-2014 and compressing ratios. HHL was $3 and $5 ten and six months ago. While we shouldn’t anchor to those prices, there is clearly downside risk, so some points to reassess along the way are required. It’s hard to buy something you recently sold, especially if the price is higher, but if you want to ensure you don’t have major capital losses you have to increase your probability of being wrong in line with the market is telling you.

My cost basis is around $5 and I own HHL is our super fund, throw in 100% franking credits, I can live with the 12.6% cost basis return. Current forward yield for a SMSF is around 8.4%