Value Partners

Value Partners profit slumps 96pc

Investment losses take toll on fund house but the outlook for second half remains positive

PUBLISHED : Tuesday, 13 August, 2013, 5:17pm
UPDATED : Wednesday, 14 August, 2013, 1:51am

Value Partners, the top-rated fund house set up by one of Hong Kong's most influential traders, yesterday reported a 96 per cent drop in net profit for the first half, mainly due to substantial fair-value losses on its investments.

Net income fell to HK$3.3 million for the six months to June, in line with the company's profit warning in July. That was the lowest six-month profit for the firm since the depths of the global financial crisis in the second half of 2008.

But the poor performance could be temporary as the Hong Kong market was likely to recover in the second half on more monetary easing on the mainland, said AMTD analyst Kenny Tang Sing-hing. Positive sentiment would boost fund subscription and performance fees, he added.

The company said it suffered a loss on investments of HK$101.8 million in the first half, but by the end of July it had recouped HK$36.7 million of the losses.

Fund sales remained robust in the first five months but it saw redemption in June, when the market slumped amid liquidity tightening on the mainland.

Assets under management at the fund house stood at US$8.6 billion at the end of June, compared with US$9.3 billion in May and US$8.5 billion at the end of last year.

Performance fees rose to HK$15.4 million during the first half from HK$905,000 a year earlier, as more funds returned above their high water mark, according to the filing.

A fund's high water mark refers to its historical peak performance, beyond which an investment manager may be entitled to performance fees.

Morgan Stanley analyst Anil Agarwal, who has a neutral rating on the stock with a target price of HK$5.75, estimated the firm's assets under management would reach HK$9.7 billion this year and performance fees would total HK$400 million for the full year.

Shares in Value Partners rose 3 per cent to HK$4.80 yesterday, while the benchmark Hang Seng Index gained 1.2 per cent.

Founded by Cheah Cheng Hye, Value Partners earlier said it would buy a 49 per cent stake in Shanghai-based KBC Goldstate Fund Management, making it the first Hong Kong-based asset manager to invest in a mainland mutual fund company.