Last week, MLP increased its FY'24 EBIT guidance thanks to a favourable development of FERI's institutional fund solutions, leading to highly profitable performance fees in Q3. In detail:
MLP disclosed € 17m of performance fees collected in the third quarter, which compares extremely well to last year's Q3 (€ 0.1m) as well as to Q1'24 (€ 3.8m) and Q2 (€ 5.4m) and which is the second largest quarterly collection over the last 4 years (largest: € 27m in Q4'21).
While the exact source of performance fees is undisclosed, we expect it to have mostly stemmed from FERI's non-public institutional fund solutions (Alternative and "other" Assets, c. 93% of FERI's AuM, see p.2 for details) as the observable public funds (Optoflex and Equity Flex fund families) have not performed to the extent to explain the large amount of € 17m. As it is impossbile to observe or anticipate the fund performance of the non-public funds from the outside, the strong collection of performance fees hit us with a positive surprise.
Consequently, MLP raised its FY'24e EBIT guidance by € 10m from € 75-85m to € 85-95m, now in line with our old estimate of € 90m. Assuming a 60-75% incremental EBIT margin from performance fees (eNuW), this implies € 10-13m of incremental Q3 EBIT and fully explains the € 10m guidance increase.
As we have modeled our € 90m EBIT target under the assumption of only € 1m performance fees in Q3 (we have assumed no performance fees from non-public funds due to their unpredictability) we add an incremental € 10m EBIT to our previous Q3 EBIT estimate, but also finetune our Q4 estimate by adding € 5m to our personnel expense estimate. As a result, our new FY'24e EBIT estimate arrives at the top-end of the new guidance at € 95m (old: € 90m), which implies a strong EBIT expansion by 34% yoy.
In sum, the guidance hike completely underpins our positive view on the stock. Additional to performance fees, the recovery of the EBIT-negative real estate business as well as the ongoing strong net interest income from banking, should lead to improving profitability into this and next year. This directly contradicts MLP's valuation, which should rerate once the hike in profitability becomes ever more visible. Therefore, we reiterate our BUY recommendation, confirm MLP's position in our NuWays' AlphaList and increase our PT to € 12.00 (old: € 11.50), based on FCFY'24e and SOTP.
ISIN: DE0006569908
