CAPE TOWN – Sygnia’s private placement on the JSE in the middle of last month was one of the most well-received listings of the year. There was such demand for shares in the asset manager that the placement was almost 20 times oversubscribed.
Those who managed to get their hands on Sygnia stock were very quickly rewarded with the share jumping from its placement price of R8.40 to R15.30 in its first day of trade. It has since come back slightly from those levels, but the company’s first set of results released on Wednesday give some indication as to why market participants were so eager to get involved.
For the year to 30 September, Sygnia grew its assets under management and administration by 21.4% to R137 billion. Revenue was up 41% on the previous year to R234 million, and profit before tax was 53% higher at R84 million.
The company reported diluted headline earnings per share of 60.40 cents. That was 43.4% higher than in 2014.
Net cash inflow from operating activities jumped nearly 200% to R112 million, boosting Sygnia’s cash balance to R102 million at the end of the year. This is good news for investors who can expect a maiden dividend to be announced with the interim results for the six months to March.
Sygnia’s CEO Magda Wierzycka told Moneyweb that they have continued to see strong asset inflows over the last two months following the reporting period, aided by the publicity surrounding the listing. She says that the potential for growth exists in all areas of the business, covering its index tracking, multi-manager, fund of hedge funds and investment administration operations.
The bulk of the company’s assets are from institutional investors, and Wierzycka expects growth in this space to continue. Sygnia’s multi-manager funds have enjoyed stellar performance of late and that will continue to boost inflows, while index trackers are very quickly becoming more popular to pension funds.
“We have very little competition in the South African index tracking market,” Wierzycka said. “National Treasury is very supportive of lowering costs and that is causing huge interest in our offering from institutional investors.”
Wierzycka noted that since the latest draft regulations on default options were released in July, Sygnia has been surprised at how quickly the market has placed attention on passive options.
“Literally overnight pension funds were looking at index tracking,” she said. “The focus on fees has caught even us by surprise.”
Assets under management in the company’s institutional index tracking funds grew by over 100% for the year, up from R4.9 billion to R10 billion.
There is a similar story in the retail space. At the moment, retail assets only make up around 6.5% of the business, but there is good opportunity for growth here too as low cost passive offerings become more mainstream.
“I think the retail index tracking business has huge potential in the context of lower market returns and the volatility we have experienced, which has put a focus on fees,” Wierzycka said. “These products are becoming more attractive to financial advisers and direct investors and we do expect this to become a material part of our business.”
Sygnia also plans to launch a ‘robo-adviser’ service in February or March next year to facilitate direct selling to investors online.
The biggest plan for the business in the coming year is however the launch of a low cost umbrella fund, which is planned for the second quarter of 2016. Wierzycka believes that Sygnia has the potential to be a major disruptor in this space.
“The giant, complex umbrella funds offered by the life insurers have multiple layers of fees, and we want to offer a streamlined proposition that will be a credible alternative,” she said. “It will be open architecture and user friendly, and stripped of the layers of costs.”
Sygnia shares traded higher for most of the day, but eventually closed flat at R14.90.