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Standard Life Aberdeen 'yet to rerate as an asset manager', says JPM Cazenove

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Standard Life Aberdeen 'yet to rerate as an asset manager', says JPM Cazenove

Thu, 07 September 2017
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(ShareCast News) - Since sealing its merger, Standard Life Aberdeen is a more diverse business offering growth potential and even the potential to "unlock hidden value", JP Morgan Cazenove said as it initiated coverage on the stock with an 'overweight' rating.
Cazenove, which set a price target of 540p, spelled out the three key attractions at the merged group as beginning with a business that is well positioned to benefit from what is a "structurally growing" market, spanning the retail platform market and workplace pensions market.

"Over the past decade, Standard Life's UK pensions business has posted net inflows in every quarter, reflecting structural growth in the UK savings market, which we believe will continue to provide an attractive source of AUA and earnings growth."

As a merged entity the group's combined asset management business now is more diversified product offering, better distribution capabilities, limited client overlap and of course economies of scale.

Finally, the potential to unlock hidden value, "could come" from factors such as deploying the circa-£0.5bn of excess capital, a potential disposal of non-core UK annuities business, or an IPO of the near-£2.2bn Indian life insurance joint venture that would "make its valuation more visible in a sum of the parts".

With the stock trading at an attractive 11.5 times 2019 forecast earnings and offering a yield of 5.8% in 2019 versus P/E multiples of circa 13 times and insurance P/E multiples of yield of circa 10 times, "suggests the market is yet to re-rate the business more towards an asset manager".

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