* Q4 EPS ex-items C$0.40 vs C$0.20 yr ago
* Analysts forecast profit of C$0.29
* AGF Trust boosts profit as loan losses fall
* AUM up 25.5 pct in 2009 on institutional gains (Adds details)
TORONTO, Jan 27 (Reuters) - AGF Management Ltd (AGFb.TO) posted a stronger than expected quarterly profit on Wednesday as revenue and assets under management jumped, sending shares of Canada's third-largest publicly traded fund manager up 6 percent.
Plunging stock markets and asset values sideswiped fund managers around the world early in 2009, but AGF, like its rivals, started to rebound later in the year and picked up momentum in its fourth quarter.
In a strong signal to investors, Toronto-based AGF also said it was boosting its dividend, saying it was confident of future growth after a difficult year.
The company showed a net profit for the three months ended Nov. 30 after posting a net loss a year earlier. Stripping out one-time items, profit nearly doubled, topping analysts expectations on aggressive cost cutting.
"The primary source of the beat was lower than forecast SG&A expense at the investment management division," RBC Dominion Securities analyst Geoffrey Kwan said in a research note.
BMO Capital Markets analyst John Reucassel said selling, general and administrative expenses came in about C$10 million lower than expected, mainly due to lower severance costs and lower incentive compensation.
After one-time items are excluded, AGF reported its profit rose to C$35.7 million ($33.5 million), or 40 Canadian cents a share, in the quarter ended Nov. 30, up from C$18.4 million, or 20 Canadian cents a share, a year earlier.
That surpassed average analyst expectations for a profit of a 29 Canadian cents a share, according to Thomson Reuters I/B/E/S.
Net income was C$45.5 million, or 50 Canadian cents a share, in the fourth quarter compared with a year-earlier loss of C$19.3 million, or 21 Canadian cents a share.
The results included a C$9.8 million reduction in income taxes in the latest quarter and an impairment charge in the year-earlier period.
AGF said revenues rose 3.6 percent in the fourth quarter from a year earlier, while assets under management rose 25.5 percent in the year as a whole.
"I believe our strategy is right on track, but our stock is undervalued," Chief Executive Blake Goldring told analysts on a conference call, pointing to the "extraordinary instability" that rocked financial markets early in 2009.
AGF shares rose 95 Canadian cents, or 6.25 percent, to C$16.15 on the Toronto Stock Exchange on Wednesday afternoon. The stock hit a 52-week low of C$6.74 in February 2009, a small fraction of its C$40 value in 2007, but steadily recovered to hit a 52-week high of C$17.90 in December.
Reucassel said his target price is C$16.50.
Asked on a conference call how much of the cost cutting could be maintained, Chief Financial Officer Greg Henderson said much of the expenses were linked to asset levels, and would fluctuate depending on AGF's growth.
But he noted the cost savings achieved through job cuts had been painful, so management would be reluctant to boost staffing until they were certain of durable growth.
Last year, the fund manager opened a Boston office, and said it was targeting institutional growth and the U.S. retail market, broadening its appeal beyond Canadian retail clients, advisers and wealthy individuals.
"AGF is well positioned in 2010 as we leverage our world-class investment management expertise across target markets in both the retail and institutional space," Goldring said in a statement.
Strong results at AGF Trust helped power the profit, AGF said in a statement.
The fund manager said it intends to increase its quarterly dividend on class A voting common and class B nonvoting shares to 26 Canadian cents a share from 25 Canadian cents, effective in March.
$1=$1.07 Canadian Reporting by Andrea Hopkins; editing by Rob Wilson