Jefferies initiates coverage on JTC at 'buy'

Analysts at Jefferies initiated coverage on fund manager JTC with a 'buy' rating and an 860.0p target price on Tuesday, citing exposure to a growth industry and a "positive outlook".

Jefferies stated JTC operates in a growing market, has a record of good M&A execution, and high cash conversion, with the "underpenetrated" US market, the world's biggest, also presenting "an important opportunity".

"Our estimates are for mid-single-digit AUM growth to the end of the decade globally, with a continued shift to alternatives. This would expand JTC's opportunities, on top of further market penetration (especially in the USA). We forecast 15% revenue growth yearly to 2025 as a result (vs c. 20% historically)," said Jefferies.

The broker highlighted that with long-term income streams, a 15% top-line compound annual growth rate to 2025e, stable margins, and a 30% dividend pay-out, it reckons JTC offers "attractive exposure" to the rising internationalisation and regulation of finance.

"Our DCF gives an £8.60 valuation on a 9% cost of equity. We reduce profit growth from our circa 10% explicit forecast over five years to a 2% terminal rate. That equates to a 1.2% full-year 2023 yield and a price-to-earnings two years forward broadly in line with the long-term average of 21.0x," Jefferies added.

Reporting by Iain Gilbert at Sharecast.com