Cohen & Steers, Inc.

CNS Details

Cohen & Steers, Inc. (NYSE: CNS) is an investment management firm focusing on real estate assets, listed infrastructure, commodities and natural resource equities, and preferred securities. The company manages three types of investment vehicles:  institutional accounts, open-end funds, and close end-funds. CNS earns its revenue from fees for managing or sub-advising client accounts, investment advisory, distribution, and service fees received from its open-end and closed-end funds.

Dissolution of a Fund: On June 30, 2021, CNS announced the liquidation of Cohen & Steers MLP Income and Energy Opportunity Fund, as approved in the special meeting of shareholders convened on the same day. Stockholders of the fund will be entitled to receive liquidating distributions after the close of business on August 6, 2021. After August 2, 2021, the fund would cease to trade on NYSE, and hence there will be no secondary market for its shares. Furthermore, as a result of the ongoing liquidation, the fund will not distribute any future dividends.  

Q2FY21 Results: The company reported a 53.3% rise in total revenue to a record USD 144.27 million in Q2FY21 (ended June 30, 2021) compared to USD 94.09 million in Q2FY20. Investment advisory and administration fees, which represented 93.12% of the total revenue in Q2FY21, increased 55.05% YoY. The impact of improvement in topline reflected in operating income, wherein the company achieved YoY growth of 69.1% to USD 59.70 million in Q2FY21 vs. USD 35.30 million in Q2FY20, with a 390 bps improvement in operating margin. Net income surged 63.3% YoY to USD 46.58 million in Q2FY21 compared to USD 28.52 million Q2FY20. As of June 30, 2021, the company’s Assets Under Management (AUM) stood at USD 96.23 billion, of which 45.2% were in open-end funds.

Key Risks: In FY20, CNS’ largest institutional client, Daiwa Asset Management, which holds most of its assets in US REIT strategies, accounted for ~27.9% of the total institutional account assets and ~11.6% of the total AUM. Any unfavorable movement in the investor demand for Daiwa’s products could result in an outflow of assets sub-advised by CNS, adversely impacting its revenues and results of operations. In addition, as of December 31, 2020, 60.1% and 29.0% of the company’s AUM were concentrated in real estate and preferred securities. Any prolonged movement in the interest rate, a downturn in the performance or value of real estate securities could harm CNS’ operational performance. Furthermore, CNS operates as an investment management company, which is subject to several federal and state regulations both within and outside the US. The issuance of stricter regulations or an increase in SEC enforcement activity could adversely affect its profitability.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CNS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: CNS' stock price has increased by 23.90% and 48.08% in the past 6 and 9 months, respectively, and is currently close to the higher end of the 52-week range of USD 53.14 to USD 84.91. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 64.64. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 69.60. Considering the significant increase in the stock price, we believe the current price adequately reflects the decent fundamentals and recommend a "Sell" rating on the stock at the current price of USD 84.18, up 1.17% as of August 02, 2021, at 11:56 AM ET.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.