Quarterly,
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Based in Fairport, NY, Manning & Napier (proposed MN) scheduled a $200 million IPO with a market capitalization of $1.4 billion at a price range mid-point of $16 for the week of November 14, 2011. |
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SUMMARY |
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MN is clearly a high quality investment advisor, see ‘MN RATINGS TRACK RECORD" below. Comparing MN’s valuation metrics, however, we find they are similar to companies in different segments. |
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Price-to-sales |
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MN’s Price-to-Sales (annualizing September 2011 nine months) ratio is similar to some investment advisory firms, including Gamco Investors (GBL) and T. Rowe Price (TROW) which have market cap (price) to sales ratios respectively of 4.1 and 4.8, compared with MN’s 4.3 |
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Price-to-earnings |
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However, MN’s Price-to-Earnings (annualizing September 2011 nine months) is more comparable to investment banking advisory firms Greenhill (GHL) and Evercore Partners (EVR), which have price to earnings ratios respectively of 30 and 71, compared to MN’s 44. |
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Assets Under Management per employee |
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MN’s Assets Under Management (AUM) per employee is comparable to alternative investment managers Blackstone (BX), KKR (KKR), Apollo (APO) which are respectively $102 million $85 million, and $138 million compared with MN’s $94 million. |
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Market capitalization per employee |
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And MN’s market capitalization per employee is comparable to KKR (KKR) and Apollo (APO), which are respectively $4.1 million and $3.1 million compared to MN’s $3.2 million. |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
|
Annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
|
Manning & Napier (MN) |
$1,424 |
4.3 |
44 |
16.8 |
16.8 |
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CONCLUSION |
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MN is a highly quality investment managers with highly visible top line revenue and bottom line profits. It’s annualized P/E multiple of 44 appears high, so MN can’t afford sequential quarterly missteps. Everything depends on MN’s rate of growth in assets under management |
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As a company we like MN, but are not excited by MN’s indicated IPO pricing. |
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BUSINESS |
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MN is an independent investment management firm that provides a broad range of investment solutions through separately managed accounts, mutual funds and collective investment trust funds. |
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Founded in 1970, MN offers equity and fixed income portfolios as well as a range of blended asset portfolios, such as life cycle funds, that use a mix of stocks and bonds. |
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From December 31, 1999 through September 30, 2011, assets under management (AUM) has increased from $6.9 billion to $38.8 billion, representing a compound annual growth rate of 15.8% during a period that included two significant bear markets. |
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Growth in AUM resulted in an increase in our revenues from $50.2 million for the year ended December 31, 1999 to $255.5 million for the year ended December 31, 2010. |
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RECENT DEVELOPMENTS |
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As of October 31, 2011, MN’s preliminary total assets under management (AUM) was $42.2 billion, compared to AUM of $38.8 billion as of September 30, 2011 and $36.6 billion as of October 31, 2010. |
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On October 31, 2011 preliminary AUM consisted of $23.4 billion in separately managed accounts, compared to $21.6 billion as of September 30, 2011 and $21.7 billion as of October 31, 2010, and $18.8 billion in mutual fund and collective investment trust assets, compared to $17.2 billion as of September 30, 2011 and $14.9 billion as of October 31, 2010. |
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MN’S RATINGS TRACK RECORD |
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Ten of MN’s 20 mutual funds, representing more than $11 billion in AUM, have a Morningstar rating of 4 or 5 stars. |
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Lipper Fund Awards 2010 named Manning & Napier’s World Opportunities Series as the "Best International Multi-Cap Core Fund" over 10 years and their 2011 Fund Awards named MN’s International Series as the "Best International Multi-Cap Core Fund" over three years. |
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S&P Capital named MN’s International Series and Dividend Focus Series Silver Award Winners in their second annual U.S. Mutual Fund Excellence Awards Program for the year ended August 31, 2011 |
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LOW CHURN RATE |
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MN’s average annual separate account cancellation rate was 3.6% over the last five years ending December 31, 2010, as compared to an industry rate of 24.9% according to Cerulli Associates. |
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DIVERSIFIED REVENUE STREAM |
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MN’s client base is well-diversified across both individual and institutional client types, with the largest direct client relationship representing only 2.2% of total AUM as of September 30, 2011. |
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As of September 30, 2011, the largest relationship MN has with a financial intermediary represents 5.3% of total AUM. The mutual fund platform representing the largest portion of MN’s fund assets represents an additional 5.7% of total AUM. |
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This broad distribution has made MN’s business less susceptible to losses from any one client or channel and has contributed to the stability of MN’s earnings. |
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COMPETITON |
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MN competes in all aspects of our business with a large number of investment management firms, commercial banks, broker-dealers, insurance companies and other financial institutions |
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EMPLOYEES |
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As of September 30, 2011, MN had 450 employees, i |
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USE OF PROCEEDS |
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MN expects to net $186 million. 100% of the proceeds are allocated to purchase shares from insiders and minority shareholders |
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Manning & Napier (MN) |
MN, C+, 7 |
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Post PO shares: 89mm |
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Investment mgt |
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Sept 9 mos |
Sept 9 mos |
|
|
Fairport, NY |
2008 |
2009 |
2010 |
2010 |
2011 |
IPO Mkt |
|
Revenues ($mm) |
$146 |
$163 |
$256 |
$182 |
$250 |
Cap (mm) |
|
Pre-tax profit |
$59.4 |
$55.0 |
$1.0 |
$35.0 |
$31.0 |
$1,424 |
|
Taxes |
$0.4 |
$0.4 |
$6.3 |
$0.6 |
$6.7 |
@$16 |
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Net profit ($mm) |
$59.0 |
$54.4 |
-$5.6 |
$34.1 |
$24.4 |
|
|
Net income (loss) % of revenue |
40% |
33% |
-2% |
19% |
10% |
|
|
Assets Under Mgt ($bb) |
$16.2 |
$28.3 |
$38.8 |
|
$38.8 |
|
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Assets Under Mgt, Oct '11 ($bb) |
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|
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$42.2 |
|
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AUM Oct vs Sept 2011 |
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|
|
9% |
|
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Assets Umgt per employee ($mm) |
|
|
|
|
$94 |
|
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
Annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
Manning & Napier (MN) |
$1,424 |
4.3 |
44 |
16.8 |
16.8 |
14% |
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SCORECARD |
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Mgt |
Market |
Market Do- |
Proprie- |
Total |
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1-5, 5 is high |
|
|
Growth |
mination |
tary |
rating |
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20 is perfect |
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2 |
2 |
2 |
1 |
7 |
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Employees |
AUM* |
AUM/Empl |
Market |
Market Cap |
|
|
Alternative Investment Mgrs |
|
($bb) |
($mm) |
Cap |
per Emply ($mm) |
|
|
Manning & Napier (MN) |
450 |
$42 |
$94 |
$1,424 |
$3.2 |
|
|
Blackstone (BX) |
1550 |
$158 |
$102 |
$16,750 |
$10.8 |
|
|
KKR (KKR) |
698 |
$59 |
$85 |
$2,860 |
$4.1 |
|
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Apollo (APO) |
522 |
$72 |
$138 |
$1,610 |
$3.1 |
|
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*Assets Under Mgt |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
Annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
Investment Advisory Firms |
|
|
|
|
|
|
|
Manning & Napier (MN) |
$1,424 |
4.3 |
44 |
16.8 |
16.8 |
14% |
|
Gamco Investors (GBL) |
$1,400 |
4.1 |
17 |
3.5 |
3.5 |
14% |
|
T. Rowe Price (TROW) |
$13,180 |
4.8 |
17 |
4.0 |
5.1 |
2% |
|
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Investment Banking Advisory Firms |
|
|
|
|
|
|
|
Manning & Napier (MN) |
$1,424 |
4.3 |
44 |
16.8 |
16.8 |
14% |
|
Greenhill (GHL) |
$1,070 |
12.0 |
30 |
2.9 |
5.4 |
19% |
|
Evercore Partners (EVR) |
$723 |
1.3 |
71 |
8.5 |
16.8 |
28% |
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