Broker tips: Man Group, Wise

The investment management firm reported on 1 August that assets under management (AuM) reached a record $152bn in the first six months of the year, up from $143bn at the end of 2022. However, core earnings per share slumped to just 8.9 cents, from 24 cents the year before, due to significantly lower performance fee revenue as the result of the sharp reversal in markets around the March banking crisis.

The shares, trading at 238.8p prior to the results, had dropped to around the 200p level in the three weeks since - a reaction which Citi said "seemed harsh".

"While performance fee headwind remains [a] key near-term focus, we see management fee outlook as resilient, with improving diversification by asset and client mix," the bank said.

In valuation terms, Citi pointed out that the stock currently trades at under eight times forward earnings, more than a 25% discount to the long-term average.

"Our bull-bear analysis indicates shares are pricing in much weaker AuM and performance growth from current levels, which we view as unwarranted for underlying growth potential and client engagement over the medium term. We raise our target price to 270p and reiterate 'buy'."

Numis has upgraded its forecasts and retained its 'buy' stance on foreign exchange platform Wise after a stronger-than-expected start to the new financial year.

The broker has left its 900p target price unchanged for the stock, suggesting significant upside from Tuesday morning's price of 656.4p, up 1% on the day.

Wise reported in July that revenues in its first quarter were up 29% year-on-year £240m, while income surged 66% to £311m.

Numis said the figures resulted in 2.4% and 5% increases to its full-year sales and profit estimates, respectively. It now expects revenue to come in at £1.27bn for the year to March 2024, up from £0.96bn previously, while pre-tax profit is predicted to rise from £146.5m to £265.2m.

"The Wise equity story is about gaining share of a very large global market for personal and SME cross-border money transfers by being materially cheaper, faster and more convenient than the banks that still control the majority of the market," Numis said.

"As long as the customer and volume numbers indicate that Wise continues to gain share of the market and there is nothing suggesting that market dynamics are about to change materially, we continue to see our valuation well underpinned."

Looking ahead, the broker said that while new entrants to the market will likely continue to emerge, Wise will be "hard to match" in terms of price, speed and convenience.