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BMO Research July 14th

BMO Research July 14th

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Published by: smutgremlin on Jul 14, 2010
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This report was prepared by an analyst(s) employd as a research analyst(s) underFINRA rules. For disclosure statements, including
Gluskin Sheff + Assoc.
(GS-TSX)
Stock Rating: Market Perform
Industry Rating: Market Perform
July 13, 2010
Research CommentToronto, Ontario
Atul Shah
BMO Nesbitt Burns Inc.(416) 359-4691Atul.Shah@bmo.com
Price (13-Jul)
$17.10
52-Week High
$23.65
Target Price
$18.50

52-Week Low
$14.85
Lowering Earnings Estimates and Target Price; NoNear-Term Catalyst to Drive Stock Price Higher
0.51.01.52.02.53.0
Gluskin Sheff + Associates (GS)
Price: High,Low,CloseEarnings/Share
 
51015202530
Event
Gluskin Sheff announced that AUM at June 30, 2010 were approximately $5.5billion and its preliminary estimate of performance fees for Q4/10 wasapproximately $1.5 million. Both AUM and performance fees were lower thanour estimate of $5.8 billion and $4.5 million, respectively.
ed by BMO Nesbitt Burns Inc., and who is (are) not registerethe Analyst's Certification, please refer to pages 4 to 6.
Impact
Negative.
Forecasts
We are decreasing out 2010 and 2011 EPS estimates by $0.05 and $0.10 to$1.30 for both years from $1.35 and $1.40, respectively.
Valuation
We are lowering our target price by $1.00 to $18.50 from $19.50 to reflect abase valuation of $14.00 (16.5x 2011E base EPS of $0.85) and a performancecomponent valuation of $4.50 (10x 2011E performance EPS contribution of $0.45).
Recommendation
Gluskin Sheff is rated Market Perform to reflect a total potential return of 14%.We expect the pace of AUM growth to slow from 20%+ in fiscal 2010 to around10% in fiscal 2011. We also expect the company to earn relatively modestperformance fees in fiscal 2011. Our forecast calls for fees of $28 million, adrop of 35% from $43 million in fiscal 2010. Gluskin Sheff’s stock price hasfallen by 20%+ over the past three months, more than three times the S&P/TSXFinancials Index drop of 6%. However, we don’t see any near-term catalyst(s)that would drive the price higher.
024
Volume (mln)
024200620072008200920100100200
GS Relative to S&P/TSX CompLast Data Point: July 12, 2010
0100200
 
(FY-Jun.) 2008A 2009A 2010E 2011EEPS
$1.34 $0.73 $1.30
$1.30
P/E
13.2x 13.2x
Rev.
 
($mm)
$106 $69 $122 $110
Net Income
 
($mm)
$39.3 $21.2 $38.3 $38.0
Client Assets
 
($b)
$5.6 $4.5 $5.5 $6.1
Quarterly EPS Q1 Q2 Q3 Q42008A
$0.26 $0.48 $0.22 $0.38
2009A
$0.21 $0.18 $0.14 $0.20
2010E
$0.20a $0.73a $0.17a $0.20
 
Dividend
$0.50
Yield
2.9%
Book Value
$2.90
Price/Book
5.9x
Shares O/S (mm)
29.2
Mkt. Cap ($mm)
$499
Float O/S (mm)
8.4
Float Cap ($mm)
$144
Wkly Vol (000s)
144
Wkly $ Vol (mm)
$2.9
Net Debt ($mm)
-$94.5
Next Rep. Date
Sep (E)
Notes:
All values in C$; Subordinate Voting
Major Shareholders:
Eight persons own all the multiple votingshares representing 97% of the shareholders' votes
First Call Mean Estimates:
Not Available
Changes
Annual EPS
 
Quarterly EPS
 
Target 
2010E
 
$1.35
 
to
 
$1.30
 
Q4/10E
 
$0.25
 
to
 
$0.20
 
$19.50
 
to
 
$18.50
 
2011E
 
$1.40
 
to
 
$1.30
 

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