Magellan Drops Most in Over a Year on ‘Lofty’ Growth Aspirations

(Bloomberg) -- Analysts are shying away from one of Australia’s best-performing stocks this year as they debate whether growth plans can justify its pricey valuation.

Shares of Magellan Financial Group Ltd. plunged as much as 8.1% on Wednesday, the most since July 2018, after the asset manager raised A$275 million ($186 million) to help fund growth. Magellan announced the capital raising Tuesday in its 2019 earnings results, alongside plans to hold an initial public offering for a listed high-conviction fund and develop a retirement product.

For a breakdown of Magellan’s earnings, click here

The company’s “lofty expectations” spurred Citigroup Inc. analysts to downgrade their rating on Magellan to sell, coupled with “lumpy” performance fees and the asset manager’s high valuation compared to peers, according to an Aug. 13 note.

Magellan has climbed 136% this year, the second-best performer on Australia’s benchmark S&P/ASX 200 Index, trailing Pro Medicus Ltd., which was only added to the index earlier this month.

Ord Minnett Ltd. also cut its rating on Magellan to sell from hold, citing the stock’s price tag as a drag on the company’s vision.

“While we are supportive of continued listed strategy proliferation, direct-to-consumer relationship building and retirement products, we believe the market is paying up for success,” the analysts wrote in an Aug. 14 note.

To contact the reporter on this story: Jackie Edwards in Sydney at jedwards160@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Tim Smith, Naoto Hosoda

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