One FTSE 100 listed Stock Under the Investors' Radar - abrdn PLC

abrdn PLC

abrdn PLC (LON: ABDN) is an FTSE 100 listed global asset management entity that offers solutions like fixed-income, emerging market equities, real estate, and multi-asset solutions.

Investment Rationale for Valuation – Buy at GBX 202.80

• Strategic Progress: The company delivered decent progress in FY21 as the first year of its three-year plan for growth. It has successfully rebranded itself to abrdn during FY21 and has also announced the proposed acquisition of interactive investor. The transaction is expected to expand its client reach and is anticipated to be double-digit earnings accretive.
• Impressive Financial Performance: The Group reported an increase in its fee-based revenue by 6% to £1,515 million in FY21, compared to £1,425 million in the prior year. Adjusted operating profit grew by 47% to £323 million in FY21, from a level of £219 million in the prior year.
• Improvement in Cost/Income Ratio: There has been considerable improvement in the cost/income ratio to 79% in FY21, from a level of 85% in FY20. This has been achieved despite the looming inflation concerns.
• Technical Indicator: The price of the stock seems to be trading around the lower Bollinger band, with low RSI levels of 36.66 indicating the possibility of reversal from these levels.

Key Risks

• Global Risk Concerns: The present economic scenario has been very volatile owing to inflation concerns and geopolitical tensions. This coupled with the lingering impacts of the COVID-19 pandemic poses a threat to the revival of the economy.
• Absence of Synergy from Acquired Businesses: The Group is also faced with the risk of acquisition if the acquired entity fails to consolidate with the parent firm.

Financial Highlights (for the year ended 31 December 2021, as of 01 March 2022)

(Source: Company Website)

• Rise in EPS: The Group reported decent performance during FY21 with uptick in diluted earnings per share at 46.0p, compared to 37.9p in FY20.
• Uptick in AUMA: The company reported a 1% increase in AUMA to £542 billion in FY21, compared to the prior year.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22E)

*Peers: Few peers considered are Gresham House PLC, River and Mercantile Group PLC and Frp Advisory Group PLC

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

Conclusion

The management is upbeat about its successful implementation of strategy and improvement in revenue. The company further remains positive on delivering CAGR revenue in high single figures moving ahead.

Based on the improvement in revenue performance, growth in bottom-line, strategic rebranding, and support from the valuation as done using the above method, we have given a “Buy” recommendation on abrdn PLC at the current market price of GBX 202.80 (as of 25 March 2022, at 09:01 AM GMT) with lower double-digit upside potential based on 17.17x 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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