Sale of AGF Trust highlights the real business value that provides downside protection.
AGF Management Limited sold AGF Trust to Laurentian bank. The transaction, which took place at net book value validates that the Trust business had real value that could be monetized. Based on today’s closing price and adjusting the Enterprise Value of AGF for the cash to be realized on the sale, we estimate that AGF is currently trading an Enterprise Value to EBITda multiple of around 3.5. In addition, the dividend yield is currently 8.8%.
If the Assets Under Management of AGF stabilized, we would expect the Enterprise Value to EBITda multiple to increase to around 7 and the dividend yield to reduce to under 5%; i.e. we would expect a valuation increase in the range of up to 100%, if Assets Under Management were flat. Accordingly, we think that getting paid 8.8% to wait and to have further substantial upside is a great deal and indicative of the value that the current pricing of the shares presents. This is only one example of the return potential we see in today’s markets that discount virtually all bad news and virtually no good news.
Data Sources: Bloomberg
