Performance fees are MLP's profitability kickers, but with capital markets experiencing downturns over the past, MLP has not recognized a substantial impact in the last five quarters. However, as capital markets now see a return to former ATHs, performance fees for MLP could be in the cards as well. Therefore, MLP should be on the investors' radar, should markets continue to reach new ATHs.

While MLP stands on mutliple, independent pillars like old-age provision, non-life insurance and wealth management, the latest continues to play a significant role, accounting for approximately one-third of the group's sales. The 100% subsidiary FERI (MLP's asset manager) has grown into a large asset manager with AuM now amounting to € 56.7bn, a position comparable to renowned private banks. FERI’s wide range of services spans from institutional and private asset management to consulting and investment research. Depending on the its funds' performance, FERI is subject to extremely profitable performance fees, which serve as an icing on top of MLP's diversified business.

The performance fees, generated by funds like Optoflex, flow directly into MLP's bottom line, as all fixed costs are already covered and almost no additional costs are incurred. We expect the performance fees to have an incremental EBIT margin of more than 90%. In a booming capital market environment, these performance fees could account for a significant portion of MLP's total EBIT, as they did in FY 21 when they constituted 86% of MLP's total EBIT and lifting the EBIT margin to 10% (vs. 3% EBIT margin ex performance fees).

MLP's record high AuM of € 56.7bn (as of H1 23) forms a stronger than ever base for potential performance fees in the future. As we do not include a significant impact of performance fees in our H2 estimates, there is a potential upside. With our EBIT estimate of € 80m, we expect MLP to reach the guidance at mid-point, implying some € 5m of potential performance fees in H2 to reach the upper end of its FY guidance.

While the standalone value of FERI (€ 5.20 per share, valued at 1% of AuM) already explains 100% of MLP's market cap, the remaining business of MLP is not valued adequately, in our view. Therefore, the stock is too cheap to ignore and  we reiterate our BUY recommendation with an increased PT of € 11.00 (old: € 9.50), as we roll over valuation to FCFY24e. - continued-