Analysts mostly negative on Aberdeen but some see value

Shares in Aberdeen Asset Management were volatile after the emerging markets-focused fund manager continued to endure outflows in the last three months of 2015, but some analysts were seeing the positives.

Total assets under management of £290.6m at 31 December were up 2.4% in the last three months thanks to acquisitions that completed in the quarter, as the 11th consecutive quarter of net outflows saw £9.1bn net exiting the company but counterbalanced by a combination of positive investment performance and positive forex movements.

The outflows were less than those feared by the market, which together with the strong investment performance and unexpected AUM rise saw the shares initially leading the FTSE risers.

This might have been helped by upgrades to 'buy' for Aberdeen and fellow EM-focused asset manager Ashmore from broker Numis in a note entitled 'Catching a falling knife - no pain no gain'.

"With the EM newsflow likely to remain weak for some time, we know this probably won't be the absolute bottom, however we also know that we won't be able to time that perfectly. We do still believe that EM assets will eventually recover and that with hindsight buying on the valuations available today will prove decent value," analyst David McCann said.

Shore Capital warned the rapid decline in the revenue base could start to exert a more damaging impact on profitability as operational gearing works in reverse and requires more cost savings.

"Therefore our initial inclination is to stick with the 'sell' stance, but remain mindful of the fact that if Aberdeen can somehow arrest the gross outflows, then there should be more limited downside below 200p."

Likewise, noting the stock's high sensitivity to EM and Asia sentiment, Peel Hunt said it remained positive on the potential for an improvement in sentiment.

The update was not as bad as expected, RBC Capital Markets agreed, though it reflected that the market rout so far in 2016 should temper any enthusiasm for an inflection in the company’s flows.

"In our opinion, Aberdeen remains a company in a stressed position, with net flows negative and investment performance behind key benchmarks. We believe that any enthusiasm that greets today’s statement should be short-lived."

This was correct, as shares moved into the negative around noon, as a later update from Credit Suisse saw the broker keep its 'neutral' rating but lower its EPS estimates by 15%, 20% and 20% for the current and next two years.

Chiefly, that was due to the effect that weaker than expected market levels were likely to have on flows, the Swiss broker said, with its net fund outflows estimate for 2016 hiked to £26.0bn from £15.9bn.