Coronation versus Ninety One

Ninety One remains significantly larger than Coronation in terms of assets under management and revenue, while both companies offer a strong investment case.

Coronation has recently released its results for the financial year that ended in September, which were well received by investors.

The asset manager’s revenue was up 7% to R3.91 billion, while profit for the year increased by 245% to R2.21 billion.

The company’s positive results stemmed mainly from a favourable outcome in a dispute with the South African Revenue Service (SARS).

In June 2024, the Constitutional Court ruled in favour of Coronation that its Irish subsidiary qualifies as a foreign business establishment.

This was a big win for Coronation. The amount payable to Coronation totalled R824 million, split between an R561 tax reversal and R263 million in interest.

The interest portion was reported as “other income” in the income statement, with the tax return portion netted off in the “taxation” line item.

Therefore, the tax return positively impacted Coronation’s net profit, which was boosted from R640 million in 2023 to R2.2 billion in 2024, representing a 245% increase.

However, due to the “once-off” nature of the SARS dispute, Coronation’s actual performance over the past two years can be analysed better by terminating the impact of the SARS matter on its earnings.

Coronation’s net profit would have been R1.3 billion in 2023 without the SARS matter, and in the recently released results, it would be R1.41 billion instead of R2.2 billion.

Therefore, on a normalised basis, Coronation’s net profit increased by 8.8% instead of 245%, which is still good in the current environment.

Coronation is one of South Africa’s largest asset management companies. As of September, its total assets under management stood at R667 billion.

However, it still manages significantly less than Ninety One, the largest asset manager in South Africa.

As of September 2024, Ninety One managed R2.92 trillion, 4.4 times more than Coronation’s assets under management.

In its most recent integrated report, Coronation reported that 69% of its revenue is generated in Africa, with 31% generated internationally.

Ninety One’s revenue mix differs significantly from Coronation’s. 77% of its revenue is generated internationally, with 65% in the UK.

Since 2020, Coronation has grown its assets under management at a compounded annual growth rate (CAGR) of 4.1%, while Ninety One had a CAGR of 3.4%.

The large difference in assets under management results in Coronation generating, on average, around 25% of Ninety One’s total revenue.

On average, Coronation’s net profit is about 40% of Ninety One’s total net profit. This means it performs well in this department.

Since 2020, Coronation has generated an average net profit margin of 37%, whereas Ninety One only generated an average net profit margin of 22%.

Coronation’s higher profitability means it trades at a higher price-to-sales ratio of 3.6 compared to Ninety One’s 2.

Coronation’s price-to-earnings ratio is 10.2 times compared to Ninety One’s 8.7 times earnings. Coronation’s slightly higher assets under management growth may explain this.