Standard Life Aberdeen Plc

Standard Life Aberdeen Plc (LON: SLA) is an Investment Management Company, which is listed on FTSE 100 index. The Company is headquartered in Scotland and provides a broad range of assets management services in over 50 countries.

Investment Highlights - Standard Life Aberdeen Plc – Buy at GBX 242.70

• In the last one year, the Company delivered a decent return of ~ 5.86% and delivered higher returns compared to the benchmark Index (FTSE-100 Index).
• Acquisition of SL Asia completed on 30 June 2020, which creates a stronger insurance business with licences to serve Hong Kong and Mainland China.
• From the technical standpoint, 90-day RSI is currently supporting an upside move (around 47 level), which means the stock price could increase in the short term.

Key Risks

• The ongoing market volatility arising from geopolitical and economic uncertainties can dampen investor sentiments.
• The Covid-19 pandemic and wider economic downturn have been impacting the portfolio value of assets.

Financial Highlights – H1 FY2020 (30 June 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2020, the Company has shown a robust investment performance with assets under management and administration (AUMA) of £511.8 billion with 68% of the assets outperformed the index over three years.
• The Company reported improved gross inflow of £38.2 billion in H1 FY2020 with a net inflow of £0.1 billion excluding Lloyds banking group (LBG) withdrawal.
• SLA declared the interim dividend of 7.3 pence per share that would be paid in September 2020 and is focused on completing share buyback of £400 million in H2 FY2020.
• As of 30 June 2020, the Company has a strong capital position and balance sheet, with liquidity of £2.8 billion and a regulatory capital surplus of £1.8 billion.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Book Value Approach (NTM) (Illustrative)

Conclusion

The Company has shown a decline in financial performance in the first half of the financial year 2020. Both the top-line and the bottom-line performance declined, while profitability remained in the negative zone. The transformation programme stays on track, and it is projected to deliver cost synergies of £350 million by the end of 2020 and £50 million in 2021. Further, market recovery would support the Company's position as an active asset manager. Overall, SLA is confident about the liquidity position to pay the dividend and complete the share buyback. The stock made a 52-week low and high of GBX 170.30 and GBX 338.25, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Buy” recommendation on Standard Life Aberdeen Plc at the current price of GBX 242.70 (as on 8 October 2020, before the market close at 9:26 AM GMT+1), with lower double-digit upside potential based on 1.06x Price/NTM Book Value (approx.) on FY20E book value per share (approx.).

Man Group Plc

Man Group Plc (LON: EMG) is an FTSE-250 listed Investment Management Company, which focuses on generating attractive performance and client portfolio solutions.

The Company will announce Q3 trading update on 16 October 2020.

Investment Highlights - Man Group Plc – Buy at GBX 113.35

• As per valuation metrics, EV/Sales, EV/EBITDA, Price/Cash Flow and Price/Earnings multiples of the Man Group Plc are currently lower as compared to the corresponding multiples of the Investment Banking & Investment Services industry. It reflects, shares are undervalued as compared to the industry.
• Over the course of 4 years (FY15 – FY19), the company’s net profit surged from USD 171 million in FY15 to USD 285 million in FY19, compounded at an annual growth rate (CAGR) of ~13.62 per cent.
• From the technical standpoint, 14-day RSI is currently supporting an upside move (around 40 level), which means the stock price could increase in the short term.

Key Risks

• The impact of COVID-19 on financial markets and the subsequent negative investment performance could reduce FUM and subscriptions, which could lead to reputational damage and dissatisfied clients.
• The ongoing Covid-19 pandemic may also impact the business growth trajectory in the near term.

Financial Highlights – H1 FY2020 (30 June 2020)

(Source: Interim Report, Company Website)

• In the first half of the financial year 2020, the Company has a good relative performance in a difficult market environment, with asset-weighted outperformance of 1.3% driven by outperformance across alternative and systematic long-only strategies.
• The Funds under management (FUM) was down by 8% in H1 FY2020, driven by the market declines, resulting in the negative absolute investment performance of USD 5.4 billion.
• The Company has a strong balance sheet and liquidity position, with net financial assets of US$611 million.
• EMG proposed an interim dividend of 4.9 cents per share, slightly higher from H1 FY2019 data, due to increased management fee profits and a lower share count.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Book Value Approach (NTM) (Illustrative)

Conclusion

The Company faced a challenging time in the first half of the financial year 2020, with lower revenue and profitability. In the H2 FY2020, the Company witnessed normalising in the flow momentum. EMG is focused on investing in talent acquisition and new technology to expand the client’s portfolio and investments, which should support them in yielding progressive returns for their shareholders. The balance sheet and liquidity position remained robust and is well placed to handle volatile market conditions. Moreover, the Man Group keeps on launching new platforms for providing solutions related to investment management services, to cater to the needs of the existing and new clients. The stock made a 52-week low and high of GBX 84.72 and GBX 167.00, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Buy” recommendation on Man Group Plc at the current price of GBX 113.35 (as on 8 October 2020, before the market close), with lower double-digit upside potential based on 1.56x Price/NTM Book Value (approx.) on FY20E book value per share (approx.). 

 

*Dividend Yield may vary as per the stock price movement.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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