HiTech Group Australia Limited (ASX:HIT) in, Platinum Asset Management Ltd (ASX:PTM) out
I substituted Platinum Asset Management Ltd (ASX:PTM) for HiTech Group Australia Limited (ASX:HIT) for the following reasons.
- I am not confident about PTM's growth prospects. It is hard to outperform indices with $25 billion funds under management (FUM) and so growth will be hard to come by. Industrywide downward pressure on fees means that growth in FUM will be necessary to offset future fee reductions. In 2017 PTM reduced fees from 1.54% to 1.35% in the trust funds and flagship global fund ($16 billion FUM).
- HIT has established a multiyear track record of profit growth and has a positive outlook. It is a recruitment company specialising in IT contractors and I think demand for such workers will continue to grow for years.
- HIT delivered a 11% increase in profit before tax (PBT) in the first half of 2019, but the prior year comparison included $0.4 million of one-off unrealised gains in financial assets. Without these growth would have been 47%.
- HIT trades on a forward price-to-earnings multiple (PE) of 10 and a trailing 8% fully franked dividend yield. PTM trades on a forward PE of 17 and a trailing 6% fully franked dividend yield.
- HIT has a 10 year total shareholder return CAGR of 52.0% versus 6.9% for PTM.