Aberdeen Asset Management slumps on Barclays downgrade

Aberdeen Asset Management was under pressure after Barclays downgraded the stock to ‘underweight’ from ‘equalweight’ and cut the price target to 250p from 350p.

The bank said that while it is tempting to view the shares as solely a macro call on emerging market sentiment, significant other areas remain vulnerable to outflow risk.

Barclays highlighted that in 2015, there were significant outflows from Global Equities and the Multi-Asset area of Aberdeen Solutions.

In total, it identifies around £191bn or 2/3 of Aberdeen’s stock of assets under management as concentrated in areas of significant outflows in 2015, and said sentiment into 2016 still appears negative.

It forecasts a slowing of group outflows to £20bn in full year 2016 from £34bn in 2015, but reckons the risks are to the downside.

With a significantly lower asset base in 2016 year-on-year, revenue declines of 13% are projected.

Barclays noted the shares are a trading at 12.6x calendar 2016 price-to-earnings for a projected 25% decline in earnings per share year-on-year.

“In the light of this negative earnings momentum and outflow risk, we downgrade,” it said.

The bank cuts its 2016 EPS estimate by 8% to 22.5p and its 2017 forecast by 6% to 24.2p.

At 1053 GMT, Aberdeen shares were down 5% to 267.80p.