IGM FINANCIAL INC. $47 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is Canada’s largest mutual fund company, with $103.7 billion in assets under management.
It also offers retirement planning and other investment services. Power Financial controls roughly 55% of IGM’s stock.
IGM has two main subsidiaries. Investors Group sells its products through its own network of 3,600 financial advisors. Mackenzie Financial sells its funds through independent brokers.
The company also owns 74.7% of Investment Planning Counsel Inc. (IPC), whose 540 advisors provide a range of wealth management services. Although IPC owns the Counsel Group of mutual funds, it also sells Investors Group and Mackenzie funds to its clients.
Revenue up 47% in five years
IGM’s revenue rose from $1.6 billion in 2001 to $1.9 billion in 2002. Revenue slipped to $1.87 billion in 2003, but climbed to $2.35 billion in 2005. Earnings before non-recurring items rose from $1.58 a share (total $392.6 million) in 2001 to $2.56 a share ($682.4 million) in 2005, or 12.8% compounded annually.
In the second quarter of 2006, IGM’s profits grew 19.0%, to $0.75 a share (total $200.4 million) from $0.63 a share ($167.9 million) a year earlier. Revenue rose 9.9%, to $636.6 million from $579.2 million.
IGM sells mutual funds and other investments mainly to individuals. It now wants to broaden its client base to include more institutions and high net worth investors. Consequently, it has agreed to buy privately held Cundill Investment Research Ltd. for an undisclosed sum.
Mackenzie Financial acquired Cundill’s retail mutual fund operations eight years ago, and Cundill still helps it manage these funds. This familiarity should cut the risk that always comes with integrating new operations.
Like Great-West, IGM has a long history of dividend increases. The current annual rate of $1.59 a share yields 3.4%.
The stock hit an all-time high of $54 in April 2006, but still trades at a reasonable 16.5 times its likely 2006 profit of $2.85 a share.
IGM Financial is a buy.