The Facts (as of Aug 31, 2012)

Share price: $11.38. Book value per share: $12.46. Market cap: $1 billion (medium). Distribution: $0.27 per quarter or $1.08 per year. Current yield: 9.49%. Debt/equity ratio:0.45. Payout ratio 133%. P/E: 14.10.

The Story

The company provides investment management for mutual funds. It manages and distributes funds under the names AGF, Acuity, Elements and Harmony.

Pros

This company is highly leveraged to the stock market level. As soon as the market starts to rebound, it may help this company to rapidly increase (recover) profitability and increase the share price.

Cons

The combined conditions of markets falling and mutual fund outflows have been disastrous since 2008, shrinking the assets under management at AGF. The dividend is higher than the expected profits for the current year and the coming year. A star fund manager has recently left.

Impression

I’m not comfortable owning this company at this time. I see it as a leveraged play on a stock market recovery, which is not certain. There are many risks, some of which seem to be baked into the price, and others that could cause the price to fall further. I will continue to watch and reconsider after a dividend cut.

 

AGF Management Ltd. AGF.B

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