There’s been a few mentions of CLIG on TMF before so I have to give credit to other write ups worth reading: Burgdorf’s, TMFFlaneur’s and TMFMayn’s but I’ll try and synthesise these all together, with my own comments.
CLIG are an asset manager focused on emerging markets (EMs). EMs have had a pretty rough time recently compared to developed markets and so are fairly out of favour (See the performance of the Vanguard EM ETF here) after having an exceptional run for many years prior to 2008. This has impacted CLIG pretty badly as revenues and earnings are tied to the assets under management (AUM) the firm has. This means that AUM falls in years where the EM indices fall, and rises when the EM indices do – consequently earnings also follow the same pattern.
From 2005 to 2011 CLIG grew AUM from about $1.6bn to $5.8bn through a combination of raising more capital and EM index growth and hence earnings also shot up from 11.85p to 34p. However, since then earnings have fallen to 24.6p as AUM has fallen to $3.7bn. This is due to the underperformance of EM markets as well as a big loss of one client who took their business in-house and away from CLIG. Due to this fall it’s likely earnings will also fall for next year – brokers forecast a consensus of 19.3p but TMFMayn has used the earnings model CLIG provide in their annual report to calculate that their current run rate is 17p.
CLIG have a great management culture and a pro-shareholder attitude. The founder, Barry Olliff, owns 11.4% of the shares whilst other directors, staff & ESOP own another 12.1% of the company. The staff also participate in a profit-share agreement, whereby 30% of PTP is allocated as bonuses, so staff have a strong incentive to grow earnings and shareholder value over the long term. It’s worth quoting Barry Olliff himself on this structure in 2012:
"As shareholders are aware, we run a business with a very simple business model. We collect fees from our clients for our services, we pay our bills which are both forecastable and to a great extent fixed. We don't use leverage, nor off-balance sheet instruments, nor do we trade derivatives as principal (other than occasional low level hedging). There are no associated companies or minority interests…
