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Deutsche Bank downgrades St James's Place to 'hold'
6th Jan 2020 10:53
(Sharecast News) - Deutsche Bank downgraded its stance on shares of St James's Place to 'hold' from 'buy' on Monday as it argued that the risk/reward was now more balanced.
DB said the company faces two key questions: first, on its charging structure and whether any changes to this might lead to lower group margins; and second, on whether it can continue to grow at its targeted rate (circa 15% per annum), while also maintaining its 80% payout ratio.
"When we upgraded the shares in October, we felt these issues were more than reflected in the share price; at current levels, however, we see more balanced risk-reward and thus downgrade to hold," it said.
Nevertheless, the bank said it continues to believe in SJP's long-term positioning as arguably the leading company in a growth industry.
"Over the next five years we believe SJP can deliver circa twice the market growth rate, thanks to strong adviser growth and controlled outflows," it said. "As last year's uncertainty starts to ease and in the expectation of a near-term 'Brexit bounce', we forecast growth in gross flows recovering from -4%e in 2019 to +17% in 2020."
Deutsche lifted its price target on the shares to 1,220p from 1,190p.
At 1050 GMT, the shares were down 2.1% at 1,142.38p.
DB said the company faces two key questions: first, on its charging structure and whether any changes to this might lead to lower group margins; and second, on whether it can continue to grow at its targeted rate (circa 15% per annum), while also maintaining its 80% payout ratio.
"When we upgraded the shares in October, we felt these issues were more than reflected in the share price; at current levels, however, we see more balanced risk-reward and thus downgrade to hold," it said.
Nevertheless, the bank said it continues to believe in SJP's long-term positioning as arguably the leading company in a growth industry.
"Over the next five years we believe SJP can deliver circa twice the market growth rate, thanks to strong adviser growth and controlled outflows," it said. "As last year's uncertainty starts to ease and in the expectation of a near-term 'Brexit bounce', we forecast growth in gross flows recovering from -4%e in 2019 to +17% in 2020."
Deutsche lifted its price target on the shares to 1,220p from 1,190p.
At 1050 GMT, the shares were down 2.1% at 1,142.38p.