Overview
Standard Life Aberdeen PLC (SLA), formerly known as Standard Life plc, is a global investment company. The company offers a range of savings and investments solutions such as pensions and individual savings accounts, workplace pensions and employee benefits solutions. It also offers life and health insurance policies to individuals and groups. It provides investment management services under the Aberdeen Standard Investments brand. It markets and distributes products through branches, strategic partnerships, bancassurance, financial advisers, and brokers. Standard Life operates in Europe, Asia, the Americas, the Middle East and Australia. Total headcount is around 6,000 people spread across 52 locations globally. Total assets managed and administered globally is around £568 billion.

Trading Update (Q1 FY2019)
AUMA (assets under management and administration) surged by 3 per cent to £568.9 billionas compared with the financial year 2018 of £551.5 billion, due to the positive market movements that were partly offset by the increase in Sterling currency. Gross inflows rose by £3.5 billion, due to the impact of Virgin Money Joint Venture. The company’s AUMA also benefited from the tiny acquisition with Orion Partners (added assets £0.7 billion).

Recent News
On 2^nd May 2019, Eckpfeiler Immobilien Gruppe GmbH acquired store building of Aberdeen Standard Investments Ltd, an Edinburgh-based investment advisor, ultimately owned by Standard Life Aberdeen PLC.
On 21st March 2019, Aberdeen Standard Investments Ltd, a unit of Standard Life Aberdeen PLC, agreed to acquire 5.6 per cent stake or 1.31 million new ordinary shares in Gresham House PLC, a London-based investment advisor, for GBP 4.96 in cash per share, or a total value of GBP 6.497 million, in a privately negotiated transaction.

Financial Highlights (FY2018, £million)

(Source: Annual Report, Company Website)

The group’s adjusted profit before tax stood at £650 million, against £660 million on pro-forma basis in 2017. Fee-based revenue reduced by 11% to £1,868 million in FY 2018 over the last year, due to net outflows in 2017. Adjusted EPS from continued operations increased to 17.8p in FY 2018, from 15.2p in 2017. Because of the net outflows of funds and unfavourable movement in the market, AUMA declined by 9% to £551.5 billion against £608.1 billion in FY17. The primary decline was in equities which was impacted by investors sentiment and investment performance concerns as well as market movements. The management proposed a final dividend per share for FY18 of 14.3 pence, taking the annual dividend per share to 21.6 pence. IFRS profit after tax attributable to equity holders (including discontinued operations) rose by 19% to £830 million, driven by a profit on the sale of the insurance business (European and the UK’s business).

Share Price Performance

Daily Chart as at May-21-19, after the market closed (Source: Thomson Reuters)

On 21^st May 2019, SLA shares closed at GBX 265, up by 2.041 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 428.57/GBX 208.85. The company’s stock beta was 1.01, reflecting same directional movement of the stock as compared to the benchmark index.

Valuation Methodology

*All forecasted figures and peers have been taken from Thomson Reuters.

Conclusion
Standard Life's life and pensions business in the UK is one of the largest pensions, long-term savings and investment products providers in the country.The group markets financial products under the Standard Life brand. It primarily operates in the UK, Ireland, Hong Kong, China, India, and Germany. The company also operates a fee-based model which increases the exposure of revenue to volatility in financial markets. Going forward, the group is expected to sustain its strong market position which should help it to sustain recurring streams of revenue and profits. However, global economic uncertainties are likely to reduce the demand for financial services of Standard Life. Although the global economic growth is slowing and pulled down by declining growth in China, several economic indicators are not currently signalling an imminent recession, with a positive view held by many central bankers and governments. The company has moved responsibilities to Dublin and Luxembourg office to prepare for hard-Brexit. Based on the decent fundamental performance and the valuation done using the above method, we have given a “BUY” recommendation at the closing price of GBX 265 (as on 21st May 2019) with single-digit upside potential based on 14.17x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).

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