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  • Invesco, Improved Prospects After Morgan Stanley Deal (BUY, Target $25) 0 comments
    Apr 3, 2010 2:28 AM | about stocks: IVZ

    INVESCO (NYSE:IVZ)

    ACQUISITION

    Invesco recently bought Morgan Stanley's retail fund operations, improving its retail distribution, product mix, and reach.  These funds include the popular Van Kampen funds.  There will be many revenue synergy opportunities to maximize the distribution of equity value and municipal bond funds to investors.  More than 60% of the M&A transaction was done using equity, so Invesco certainly has capital to shore up its balance sheet.

    As equities continue to firm and perhaps rally, Invesco's AUM should also go higher, driving up fee revenue.  Post acquisition, Invesco's AUM should increase from $420 billion to $520+ billion.

    OPERATIONS

    Over 80% of Invesco's funds perform in the top half of their Lipper (mutual fund rating) categories.  It also owns the popular PowerShares India Fund, AIM Mid Cap Core Equity Fund, and AIM Intl Growth Funds.

    CAPITAL STRUCTURE

    With respect to its capital structure, Invesco does not have debt (like other money managers).  It did not have and money market risk (like Legg Mason) did in 2008 and also paid off $300mm in debt last year.  Its total debt to cash ratio is less than 15% and its DEBT/EBITDA ratio has fallen below 0.9x.

    DATA

    1. Range 19.13 - 19.63
    2. 52 week 9.33 - 24.07
    3. Open 19.17
    4. Vol / Avg. 4.16M/4.72M
    5. Mkt cap 8.38B
    6. P/E 26.04
    7. Div/yield 0.10/2.10
    8. EPS 0.75
    9. Shares 428.78M
    10. Beta     -
    11. Inst. own 86%

    PRICE TARGET

    The LA team has a price target of about $25 on the stock, and the team also expects the company to increase its dividends.

    Below is a breakdown of INVESCO's competitors and their mutual fund assets.  Invesco grew 15% in January, while the industry average growth was less than 5%.

      Mutual Fund Assets (not AUM)
    Legg Mason 189.8
    T. Rowe Price 227.7
    BlackRock 721.4
    Eaton Vance 86.2
    INVESCO 120.0
    Industry 11,000.0


    Disclosure: LA does not have a position in IVZ.
    Themes: Financials, AUM Stocks: IVZ
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