St. James’s Place PLC

St. James’s Place PLC (LON: STJ) is an FTSE 100 index listed entity that offers wealth management and investment funds management services.

On 28 July 2022, the Company expects to release H1 FY22 results.

Investment Rationale for Valuation – Buy at GBX 1,122.50

• Resilient in Business Model Despite the inflation, macroeconomic and geopolitical related uncertainties, gross and net inflows for Q1 FY22 remained broadly in line with Q1 FY21.
• Decent Dividend Yield: STJ given 51.96 pence of full-year dividend per share in FY21, reflecting a 35% increase against FY20. As per FY25 business plan, it is committed to pay-out 70% of the Underlying cash result in dividends to shareholders.
• Growth Catalyst: Jittery market conditions can lead to an increase demand for advice as the Company has well-proven investment management approach.
• Technical Indicator: The price of the stock is hovering near the lower Bollinger band with 14-day RSI level of ~32.68, reflecting an oversold scenario.  

Key Risks

• Economic Slowdown: British economy contracted in April 2022, facing pressure from the rising fuel prices and household energy bills. It is reflecting the intensified cost-of-living crunch. Moreover, the interest rate worries, the US dollar hitting two-decade peaks, and subdued economic forecasts can continue to impact corporate profits and put pressure on equity markets.
• Interest Rate Hike: With high inflation levels and energy bills, the Bank of England is expected to hike interest rates and is anticipated to increase its base rate from 1% to 1.25% in its next monetary policy meet.
• Business Risk: The moderation in trading activity and client acquisitions can impact the Company’s growth trajectory.

Q1 FY22 Funds under Management Update (for the three months ended 31 March 2022, as of 28 April 2022)

(Source: Company Website)

• Funds Under Management: The Group had declared closing funds under management of £151.25 billion during Q1 FY22, compared to £135.46 billion in Q1 FY21.
• Net Asset Value Per Share: The Company had reported net asset value of approximately £16.35 per share on the European Embedded Value basis as of 31 March 2022.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Value Approach (FY22E)

*Peers: Hargreaves Lansdown PLC, Gresham House PLC, Brewin Dolphin Holdings PLC, and IntegraFin Holdings PLC.

*All selected peers are LSE-listed Companies from the Financials sector.  

Conclusion

In a nutshell, STJ remained optimistic about the new business growth in 2022 and confident of delivering on the broader ambitions related to the 2025 plan.

Based on the decent fundamentals, resilient business model, 2025 business plan, and support from the valuation as done using the above method, we have given a “Buy” recommendation on St. James’s Place PLC at the current market price of GBX 1,122.50 (as of 15 June 2022, at 10:15 AM GMT+1) with lower double-digit upside potential based on 17.03x Price/NTM Earnings (approx.) on FY22E Earnings per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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