What do you want Scoonie? Whatever it is, make it quick.
Phil King at Regal Partners Limited (ASX:RPL) has in the last few months stepped in fresh dog turds twice, with Opthea (ASX:OPT) and Cettire(ASX:CTT). These have caused collective loss over $400m across his various funds.
I was thinking what could be done to help Phil. Clearly as shown by the RPL share price recently dropping in half, all his rich mates have abandoned ship on him.
So much for his Eastern Suburbs forever buddies. If they were true pals, why didn’t they all band together and drive RPL’s share price up? Instead, when things have gotten a little tough they have all sold up and pissed off back to their waterfronts. You have got to feel for Phil, it must be really hard having so many phoney friends.
I would not shed any tears over Phil. I am sure he is looking after himself well enough.
Well maybe we can help him and make some money for ourselves along the way. I want to talk to you about the flagship company of the Captain Phil pirate empire, that is Regal Partners Limited (RPL). Its share price is off around 50% from its December highs. RPL currently has a market cap of around $700m at a share price of $2.05, no debt and earns income through management and performance fees on various investments. Last year (RPL has an end of December reporting year) they made a statutory profit of $67m and an underlying profit of $97m. I would agree, you might take underlying profit with a bubble of caviar, however they still pushed out $52m in operating cash flow.
Eh, so what.
Well it gets interesting, RPL is a pretty decent cash making machine. RPL has three drivers of earnings:
1) Base management fees: For the second half of calendar 2024 this averaged a fat 1.2% of FUM. For the 12 months to 31/12/24 this was $129m.
2) Performance Fees: Fees “earnt” for outperformance above a given benchmark. For FY24 this was $84m
3) Other income: This is where Phil along with his Investment Committee sycophants decide to invest directly in things they know FA about. Like experimental eye drugs and expensive handbags. For FY 24 this was $39m.
Total FY 24 Income: $252m
On the expenses side:
i) Personnel expense: This is the legal looting carried out by Phil and his 192 staff. These salaries and bonuses were $99m in FY24.
ii) Operating Cost of the Fund and Depreciation and Amortisation: $25m
iii) All Other Expenses. This was the FY 24 oyster and champagne bill at Catalina’s restaurant and was $30m.
Tota FY24 expenses $154m
Did you say they spent $30m at Calalinas? That figure seems a little low.
Jessica Farr-Jones can suck down an oyster or two you know. And we all know Brendan is a piss tank.
I was just figuratively speaking - Other Expenses on the P & L were $30m.
Getting back to the business financials…
Assuming that RPL can maintain their FUM at their current levels of around $16b (March 25 level) they can earn around $190m a year from just their base management fees.
Performance fees will be less, however given the diversity of the business, lets assume they still make $10m. The Other Income we can assume to be zero, however even it is negative it is a non-cash adjustment. So the FY 25 earnings could be around $200m.
Let say expenses come off a little to around $140m.
At a rough estimate, RPL can still conservatively make a FY 25 NPAT of around $20 - $40m.
Mmmmmmm
But where it gets interesting is FY26. Remember this business is still going to make some money this year, and it effectively has no debt. It is not going to go broke.
Assuming FUM remains at about $16b (or maybe better) and RPL get performance fees similar to FY24, then when you add it all up a NPAT of around $100m or more is possible. (This assumes zero income for the “Other income” side earnings, which is the investing side of the business – and if Phil can just stop making heroic investments this should be at least neutral).
At the current share price of $2.05 RUL would be selling on a FY26 PE of around 7. Cheap.
Huh. What a joke. You are not taking into account the nature of the Funds Management business. Scoonie you dumb-arse, these sell on low PEs and have a habit of blowing themselves up! Look at that twit Hamish Douglas at Magellan (ASX:MFG). Went from over $100b in FUM now it is running less than $40b. Along with a share price collapse of nearly 90%. There are two things wrong with these types of business, your best asset gets in the elevator and leave each day, and your investment mandates can just evaporate. Like “Poof”! Just look at Hamish.
I agree with what you say. However when you look into RPL its earnings streams are very diverse. Hamish Douglas essentially rode a big equities wave in American tech companies. When that turned Hamish was finished. He was a one trick pony. You could say similar for Kerr Neilson at Platinum (ASX:PTM). He had the world of gullible investors believing he was a genius, and had the keys to the piles of riches that were to made out of China. The only one who got rich was his Mrs, whose impetuousness and arrogance resulted in her cashing out near the top. Everyone else was well and truly rear ended.
Phil is of course selling the same dream. However I would argue the dream he is selling is based on better fundamentals.
Like what?
Well look at all the various income streams that RPL has. They have been going out and buying other funds managers like Tarus, Mericks Capital, Argyle Group and PM capital. One I know a bit about is PM capital. The manager Paul Moore is well regarded and has a decent long term record for making money and growing FUM. Paul up to recently ran the listed PM capital. RPL buying PM Capital is not like the Melbourne based unlisted L1 capital buying the fatally wounded Platinum (ASX:PTM) just so they can get an ASX listing. What Paul Moore sold (and still manages) is a profitable and well functioning fund management business.
In addition RPL has a resource royalties business and a water trading business. And there is a listed Asian Fund (ASX:RG8). What I am saying this is a very diverse investment business, unlike MFG.
In some respects, in the diversity of income streams RPL resembles a Pinnacle (ASX:PNI). PNI being every investor’s favourite in this sector. An investment darling, much like a HUB or PME, and it sells on a FY 25 kick- you-in-the-testicles PE multiple of 30.
Mmmm Interesting. Tasty.
I think there will be value realised in time. There is good possibility if you bought RPL now you might make 50% on your money in 12 – 18 months. The risks I think are to the upside. Also the best buying opportunity may be right now – whilst the end of the month as tax loss selling is happening.
Ok Scoonie, you’ve got me interested. I think we need to get Phil King interviewed on Strawman and find out a little more about RPL.
Maybe, but the main thing that will drive up the RPL share price is if the people around short-arse Phil can put the brakes on him. Stopping him from swinging for the fences and trying for 5 and 10 baggers like OPT and CTT. The RPL business would be just fine without …….
STOP RIGHT THERE! Did you call Phil King a short arse?
Well, I might…………
You called him a short arse.
Well if I did, it was just an offhand comment and you have to admit he …….
Jesus Scoonie! You have done it now! How the f%$#k are we going to get him on Strawman when you go round saying things like that!
Well it wasn’t meant to ……….
WHAT!!! Are you f$%king kidding me! Next you will poking fun at his bald head or his rubbed-in-the-rugby-field face. Or saying Phil has a small dick and a big ego.
Jesus Scoonie! You don’t know when to let up do you! Your always insulting people. You’re an idiot! A klutz! A bloody KLUTZ!
Well you are not doing too bad a job with the insults yourself. Besides you would not get him on Strawman anyway…..
Don’t back chat me Scoonie you fat useless turd.
I have forgotten more about investing than you have ever learnt! Now piss off, I’ve got work to do.
