GQG -4.36%: delivered a respectable 1H26 result in the face of significant fund outflows, with earnings proving more resilient than the headline FUM movements would suggest.
Key results:
- Revenue of US$397.2m, down 1.4% and broadly in line with US$398.3m expected.
- Net profit of US$228.4m, down just 0.7% and slightly ahead of ~US$222m expected.
- EPS of US8.0c, in line with consensus.
- Average FUM of US$164.5bn, up 1%, despite US$15.1bn of net outflows through the half.
- 1H dividend of 7.3cps, just shy of the 7.5cps expected.
The numbers demonstrate just how powerful GQG’s business model can be: despite substantial outflows, higher average FUM and improved fee realisation supported a 1.9% increase in management fees, while the operating margin remained an exceptional 76%. The problem is that investment performance ultimately drives flows. Management acknowledged that weaker one-year relative returns have prompted more performance-sensitive investors to leave, although three-year returns remain strong and the core client base is sticky. Encouragingly, GQG has responded rather than simply waiting for the cycle to turn, materially increasing exposure to technology and semiconductors.
MM’s view: We remain positive on GQG, but this result wasn’t enough to put the key concern to bed. Generating broadly stable earnings while US$15bn walks out the door is impressive however allowing that flow trend to persist clearly isn’t sustainable. The 76% operating margin, strong balance sheet and 90% dividend payout make GQG an attractive earnings and income vehicle, though we need to see FUM stabilise. A recovery in the stock needs to come from improving investment performance and, ultimately, a turn in flows.
MM remains long and bullish GQG ~$1.40
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