Abrdn PLC

Abrdn PLC (LON: ABDN) is an FTSE 100 listed global asset management entity that provides a comprehensive range of fixed-income, emerging market equities, real estate, and multi-asset solutions. Standard Life Aberdeen PLC became Abrdn PLC on 2 July 2021.

It expects to release the full-year results on 1 March 2022.

Rationale for Valuation – BUY at GBX 222.90

• Available at Fair Value: ABDN is part of the FTSE 100 list and touched a 52-week low yesterday due to ongoing market uncertainties. However, it reported higher revenue, profits and strengthened capital position in H1 FY21.
• Stronger Platform for Growth: The cost-to-income ratio of 79% in H1 FY21, reflected improved operational leverage than the prior year. Moreover, the Company also progressed well in simplifying the business by exiting the Indonesian market and disposing of Parmenion and Nordics real estate business.
• Technical Indicator: From a technical standpoint, the 14-day RSI (~34.92) is close to the oversold zone, while the price is hovering around the lower Bollinger Band.
• Undervalued Multiples: On a forward 12-month basis, key valuation multiples (EV/Sales, Price/Cash Flow, and Price/Book) are quite lower than the median of the Financials industry.

Key Risks

• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.
• Business Risk: The moderation in trading activity and client acquisitions can impact the Company’s growth trajectory.

Interim Results (for the half year ended 30 June 2021, as on 10 August 2021)

 (Source: Company Website)

• Financial Growth: The Company reported improved revenue and profits in H1 FY21. It reported a 7% increase in fee-based revenue in H1 FY21 vs H1 FY20, while the adjusted operating profit of the Group increased by 52% year-on-year.
• Dividend: The Company recommended an interim dividend of 7.3 pence, which was in line with its dividend policy.
• AuMA Growth: The Assets Under Management and Administration (AuMA) stood at £532 billion at the end of H1 FY21 (FY20: £535 billion).

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Book Approach (FY22) (Illustrative)

*Peers: M&G PLC, 3i Group PLC, and Aviva PLC.

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

 Conclusion 

Post rebranding in July 2021, investment platform integration, and the acquisition of a majority interest in Tritax, the Company has shown its focus on meeting strategic priorities and client needs. It also intends to rebase dividend per share of 14.6 pence until adjusted capital generation reaches 1.5x cover. The stock made a 52-week High and Low of GBX 330.70 and GBX 221.90, respectively.

Based on the increased revenue, strengthened capital position, good progress in its growth vectors, business simplification, and favourable valuation conducted above, we have given a “BUY” stance on Abrdn PLC at the closing price of GBX 222.90 (as of 22 February 2022), with lower double-digit upside potential based on 0.83x Price/NTM Book (approx.) on FY22E Book Value per share (approx.).

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. 

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 unfavourable movement in the stock prices.

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