IGM FINANCIAL INC. $45 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 263.5 million; Market cap: $11.9 billion; SI Rating: Above average) is Canada’s largest independent mutual fund company, with $118.2 billion in assets under administration. Power Corp. controls 55.9% of IGM’s shares.
The company has three main divisions. Investors Group sells funds through its own network of over 4,000 financial advisors. Mackenzie Financial sells its funds through independent brokers. IGM also owns 74.5% of IPC Financial, whose 540 advisors provide a range of wealth management services.
IGM recently agreed to buy Saxon Financial Inc. for $287 million. Saxon provides wealth management services to individuals and institutions, and had $13.4 billion in assets under management at June 30, 2008. Saxon’s exclusive relationship with the Canadian Medical Association, holders of 30% of Saxon, also adds to its appeal.
To put the purchase price in perspective, IGM earned $216.1 million before unusual items in the second quarter of 2008. That’s up slightly from $215.9 million in the year-earlier quarter. Earnings per share were unchanged at $0.81. Revenue slipped to $721.1 million from $721.9 million.
IGM plans to maintain Saxon as a separate division, so savings from merging back office and other support operations may be slight. But the opportunity to market other products to Saxon’s medical clientele should spur long-term earnings.
The company will probably earn $3.30 a share in 2008, excluding Saxon. That implies a p/e of 13.6. IGM has also increased its quarterly dividend by 5.1%, from $0.4875 a share to $0.5125. The new annual rate of $2.05 yields 4.6%.
IGM Financial is a buy.
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