Jupiter Fund Management PLC

Jupiter Fund Management PLC (LON: JUP) is an FTSE 250 listed asset management entity, focusing on individual and institution clients through its various saving products.

On 25 February 2022, the company announced a final dividend of 9.2 pence per share to be paid on 20 May 2022 (ex-dividend date: 21 April 2022).

Rationale for Valuation – SPECULATIVE BUY at GBX 206.60

• Positive Price Environment: British house prices showed strong growth again since house prices further increased by 1.1% month-on-month in March and 14.3% growth on a year-on-year basis.
• Bright Prospects: JUP has shown improvement in AUM with gross solid flows. Its earnings per share rose 10% year-on-year in FY21. Therefore, it is well-positioned to generate incremental value for its shareholders.
• Solid Investment Performance: Over the past three years, 58% of mutual fund assets under management remained above median.
• Strong Financials: The company had a solid financial year, with underlying profit before tax rising by 21% to £216.7 million in FY21. The statutory profit before tax climbed by 39% to £183.7 million in FY21.
• Undervalued Multiples: On a forward 12-month basis, the key valuation multiples (EV/Sales, EV/EBITDA, and Price/Earnings) are quite lower than the median of the Financials sector.

Key Risks

• Macroeconomic Risks: Record inflation, central bank tightening, and wage pressure are predicted to dominate the year 2022. All these variables have the potential to harm business profits and stock markets.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.

FY21 Financial Highlights (for the year ended 31 December 2021, as of 25 February 2022)

 (Source: Company Filings)

• Robust Revenue: In FY21, the company's net revenue before exceptional items increased by 24.2% to £568.6 million, up from £457.8 million in FY20. The majority increase came from a rise in net management fees of £69.7 million to £453.7 million in FY21.
• Assets under management (AUM): JUP’s AUM grew 3% to a new high of £60.5 billion for FY21. Over three years, 58% of mutual fund AUM was above the median, indicating strong investment performance.
• Reduced Dividend: Despite a robust financial performance, there was a 15% decline in total dividend per share to 17.1 pence in FY21, as the Company retained earnings for investment in future growth areas.

One Year Share Price Chart

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

Valuation Methodology: Price/Book Approach (FY22E)

*Peers: Man Group PLC, Ashmore Group PLC, Schroders PLC, and Abrdn PLC.

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

Conclusion

 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.

Based on the robust revenue growth, AUM growth, increase in profits, we have given a “SPECULATIVE BUY” stance on Jupiter Fund Management PLC at the current market price of GBX 206.60 (as of 1 April 2022, at 10:50 AM GMT+1), with a lower-double digit upside potential based on 1.46x Price/ 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.

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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