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BY: RAUTION JAISWALWILLAMETTE UNIVERSITY
(ATKINSON GRADUATE SCHOOL OF
MANAGEMENT)
Company Analysis Presentation
November 13, 2007
______________
Legg Mason Inc.
Overview :Legg Mason is a global asset management
company.
It serves wide variety of clients including institutional and individual investors.
It operates in three divisions: Managed investments, institutional and Wealth Management.
Legg Mason’s mission is to be, and be regarded as, one of the best Asset management firm in the world.
Legg Mason Inc.
Key Facts :Legg Mason Inc. is among the top 5 US
money managers.As of Sep. 30, 2007, asset under management
is aggregated $ 1.012 trillion.Legg Mason serves institutional and
individual clients in over 190 countries.As of Sep. 30, 2007, asset under management
from non-US domiciled clients aggregated $336 billion (33%).
Quantitative Highlights
Financial Service Industry: Overview
Effects of subprime mortgage industry is deep.
Technological advancement and financial product innovation will be key factors to drive growth.
Steady growth is expected in Asia and Europe.
In short term, economic conditions are not ideal so are the earning prospects.
Industry Forecast
Scale will be the key to generate edgeMore crowded and complicated industry
landscapeA measured pace for merger and acquisitionTough pricing environment Tighter lending standardsHigh level of transparencyGreater appreciation for risk aversionProduct innovation
Principal Manager profile
One of the leading fixed income manager.
One of the America
leading equity manager. A value oriented,
small cap and micro-cap equity
manager.
Permal group is one of the five largest fund-of- hedge-fund managers in the world.
Second largest equity manager.
Value investing in both equities and fixed income in US and internationally.
International and global manger focusing on quantitative analysis.
High net worth equity manager.
Legg Mason Inc.
Highlights for 2008-2009:
AUM to grow about 10% in FY 08’ and 12% in 09’.
Operating profit to grow at 30% p.a.Net distribution expense has reduced by 42%
in FY 08’ and expected to reduced at same rate in 09’.
Under-performance by top equity managers has effected the earnings of 08’.
Legg Mason: Good Buy or Goodbye ?
Benefits of synergy is still to be effective.Equity managers will soon recover from their
recent slump.Long term trend favoring retirement planning
company such as Legg Mason.Legg Mason missed its earning for three
consecutive quarters.It has experienced substantial growth in
international market.
Running the numbers
Cost of equity= 10.5%
Growth rate = 15%
Operating profit margins = 30%
Current market price= $ 72.86
Target price= $70-$98
Legg Mason Inc.
Risk and quality assessment:Market riskRelative investment performanceRegulatory issuesIntegration challengesOperational and support riskQuality of management