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Legg Mason


Eruity Research

Eruity Research

Published in Economy & Finance , Technology
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  • 1. BY: RAUTION JAISWAL WILLAMETTE UNIVERSITY (ATKINSON GRADUATE SCHOOL OF MANAGEMENT) Company Analysis Presentation November 13, 2007 ______________
  • 2. Legg Mason Inc .
    • Overview :
    • Legg Mason is a global asset management company.
    • It serves wide variety of clients including institutional and individual investors.
    • It operates in three divisions: Managed investments, institutional and Wealth Management.
    • Legg Mason’s mission is to be, and be regarded as, one of the best Asset management firm in the world.
  • 3. Legg Mason Inc .
    • Key Facts :
    • Legg Mason Inc. is among the top 5 US money managers.
    • As of Sep. 30, 2007, asset under management is aggregated $ 1.012 trillion.
    • Legg Mason serves institutional and individual clients in over 190 countries.
    • As of Sep. 30, 2007, asset under management from non-US domiciled clients aggregated $336 billion (33%).
  • 4. Quantitative Highlights
  • 5. Financial Service Industry: Overview
    • Effects of subprime mortgage industry is deep.
    • Technological advancement and financial product innovation will be key factors to drive growth.
    • Steady growth is expected in Asia and Europe.
    • In short term, economic conditions are not ideal so are the earning prospects.
  • 6. Industry Forecast
    • Scale will be the key to generate edge
    • More crowded and complicated industry landscape
    • A measured pace for merger and acquisition
    • Tough pricing environment
    • Tighter lending standards
    • High level of transparency
    • Greater appreciation for risk aversion
    • Product innovation
  • 7. Principal Manager profile
    • One of the leading fixed income manager.
    • One of the America leading equity manager.
    • A value oriented, small cap and micro-cap equity manager.
    • Permal group is one of the five largest fund-of- hedge-fund managers in the world.
    • Second largest equity manager.
    • Value investing in both equities and fixed income in US and internationally.
    • International and global manger focusing on quantitative analysis.
    • High net worth equity manager.
  • 8. Legg Mason Inc.
    • Highlights for 2008-2009:
    • AUM to grow about 10% in FY 08’ and 12% in 09’.
    • Operating profit to grow at 30% p.a.
    • Net distribution expense has reduced by 42% in FY 08’ and expected to reduced at same rate in 09’.
    • Under-performance by top equity managers has effected the earnings of 08’.
  • 9. Legg Mason: Good Buy or Goodbye ?
    • Benefits of synergy is still to be effective.
    • Equity managers will soon recover from their recent slump.
    • Long term trend favoring retirement planning company such as Legg Mason.
    • Legg Mason missed its earning for three consecutive quarters.
    • It has experienced substantial growth in international market.
  • 10. Running the numbers
    • Cost of equity= 10.5%
    • Growth rate = 15%
    • Operating profit margins = 30%
    • Current market price= $ 72.86
    • Target price= $70-$98
  • 11. Legg Mason Inc.
    • Risk and quality assessment:
    • Market risk
    • Relative investment performance
    • Regulatory issues
    • Integration challenges
    • Operational and support risk
    • Quality of management