It has never come to light which of the three non-executive directors of Ashmore Group pulled out of a planned share sale last autumn at the eleventh hour – the first opportunity they had to offload stock since the emerging market fund manager’s £1.4 billion flotation the previous year. However, on the basis of yesterday’s first-half results and share price – at 271¾p, the stock is 13 per cent up on September’s placing and 60 per cent ahead of its issue price – that decision appears to have been sound.

Ashmore had already given estimates of its assets under management at last month’s trading update, so yesterday’s confirmation of a 16 per cent rise to $36.5 billion – up from $23.1 billion at float – was not too much of a surprise. Yet it was the underlying strength of the numbers disclosed that impressed. Pre-tax profits were up 68 per cent to £101 million, or 8 per cent ahead of forecasts, helped by a 54 per cent surge in management fees to £86 million. At £31 million, Ashmore also appears to have done a good job on keeping a lid on costs.

That the shares fell nearly 9 per cent had more to do with profit-taking – Ashmore has rallied 35 per cent over the past six months, outperforming its sector by 26 per cent, in anticipation of strong trading – than any disquiet over their detail.

Redemptions as a percentage of assets under management may have risen to 15 per cent in the six months to December 31, but that is no worse than its peer group and less than the 18 per cent level of withdrawals in 2005. Further, ignoring the $2.2 billion of net subscriptions that Ashmore has pulled in from new fund launches, net subscriptions to existing funds remain positive. The strong performance of its funds over the past six months should ensure than money continues to flow in.

The attraction of Ashmore is that it is the only London-listed play on emerging market fixed income fund management. As such it is well placed to benefit from turbulence in Western financial markets, which should accelerate diversification into unleveraged emerging market sovereign debt – both US dollar and local currency-denominated – as well as fund flows within emerging markets. For example, new regulations in Brazil mean that pension funds can hold nondomestic emerging market assets for the first time. It is also carving out a niche in emerging market private equity and distressed debt, while its low exposure to volatile equity markets – which account for $1.9 billion of assets under management – should serve it well. At 12 times next year’s earnings, Ashmore may trade at a premium to the likes of Schroders, but that rating appears to be deserved, given forecast earnings growth of 40 per cent this year and 20 per cent next. Tuck away for the long term.

Elementis

When Hanover, the activist investor, sold the bulk of its stake in Elementis early last year, the City appeared to lose interest in the chemicals group as well. Hanover’s appearance on the share register in 2005 – accompanied by its securing of two seats on the board – was the trigger for a two-year period of restructuring under which Elementis cut costs and pulled out of lower-margin commodity products and expanded in higher-margin speciality chemicals. With Hanover gone and the restructuring complete, shareholders found the prospect of steady organic growth less exciting – all the more so given concerns over Elementis’s exposure to faltering US industrial markets. Accordingly, the shares have fallen by a third since October.

But yesterday’s full-year results went some way to rekindling interest. Sales were flat but operating profits were up 21 per cent, or a hefty 31 per cent at the earnings per share level because of the company’s low tax rate.

The dividend was raised 17 per cent. Speciality chemicals now account for three quarters of operating profits, with Elementis’s exposure to oilfield services – it provides additives used in drilling – serving it especially well. However, although the company says 2008 has started well, its order book is short. Further, its discount to peers Victrex and Croda International – at 77½p, the shares trade at ten times current-year earnings – is not compelling given slower profit growth. Avoid.

Genus

Asurge in wheat prices to a record high – top-quality US grain rose 25 per cent alone on Monday – would not seem the ideal backdrop against which Genus should present its first-half results. Given that feed, much of it grain-derived, accounts for two thirds of the cost of rearing both pigs and cattle, higher wheat prices put further pressure on the margins of farmers – Genus’s customers – leaving them with less cash to spend on genetics. Genus is also exposed to wheat prices through higher feed costs in its own breeding operations. Those twin dynamics help to explain why its shares have fallen nearly 20 per cent since the start of the year.

However, yesterday’s interims showed Genus to be in fine fettle. Pretax profits were up an above-forecast 28 per cent, helped by a strong performance by its bovine division from higher milk prices and the company’s launch of sexed semen, which allows breeders to produce just female calves. Trading on the pig side was tougher, although the shift to a royalty model meant that underlying operating profits still rose despite a dip in sales.

Elsewhere, net debt fell to £93 million and should drop to £75 million by the full-year stage. Yesterday’s bout of boardroom buying – which helped the shares to bounce 5 per cent – also encouraged. However, at 715p, or 21 times annualised earnings, Genus’s near-term attractions appear fully factored in. Hold.

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