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Azimut's Re-Rating Case: Recurring Fees and the Buyback Boost
Azimut's shift to recurring fees and a 4% buyback yield could drive a re-rating. The analyst sees TNB as hidden optionality. Here's the bull and bear case
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An analyst initiated coverage of Azimut Holding on Thursday, arguing the Italian asset manager's pivot toward recurring fee income and aggressive share buybacks could unlock a re-rating. The stock, listed in Milan and traded over the counter in the U.S., has underperformed the broader European financials sector over the past year.
Azimut generates roughly 55% of its revenue from recurring management fees, the analyst noted. That share has risen as the company pushed clients toward longer-term, fee-based products. A growing pool of these fees provides more predictable cash flow and reduces the drag from one-off performance fees, which vary with markets.
The analyst also flagged the company's buyback program. Azimut has repurchased about 3% of its shares annually in recent years. At current prices, the buyback yield is near 4%, among the highest in Italian financials. Combined with a dividend yield above 3%, total shareholder returns could approach 7% per year before any earnings growth, the analyst said.
Optionality from the company's stake in TNB, a Brazilian independent asset manager, adds to the bull case. Azimut holds roughly 50% of TNB, which manages about 20 billion euros in client assets. The analyst estimates TNB is valued at zero in Azimut's current market price. Any monetization – an IPO, a stake sale, or a dividend – would act as a catalyst.