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Is Jupiter still a buy as RDR price war bites?
by Danielle Levy on Oct 31, 2013 at 13:15
Jupiter showed it is one fund and private client group that is successfully protecting its margins amid the protracted pricing negotiations taking place following the retail distribution review (RDR).
The firm which floated on the market in 2010, posted a £278 million net inflow during the third quarter, leaving assets under management on the verge of breaking through the £30 billion barrier.
Elsewhere, the group’s private client business recorded net inflows of £15 million over the period to lift assets under management to £2.2 billion.
However, with Jupiter’s share price up 109.5% at 398.3p since the company floated on 25 June 2010, is it still a buy? And can the asset manager maintain its momentum?
A number of fund managers and analysts believe Jupiter can, and welcomed CEO Edward Bonham-Carter’s (pictured) confident outlook in its recent interim management statement. They are particularly keen to highlight the potential for future dividend growth on the back of improved cashflow.
RBC Capital Markets takes the view that although Jupiter typically trades at a premium to the sector, some of this premium is justified by the company’s above-average Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin.
‘You have got quality products and margin maintenance there. If you look at what Jupiter said, it is confident it can deliver profit growth and share the rewards with investors, suggesting there could be a dividend rise. This is an example of what is happening in the sector,’ Bailey said.
Canaccord Genuity also reacted positively to the management statement. It highlighted estimates that it remains cash generative to the extent of around £160 million annually on its estimates. The company raised its target price to 430p based on a one-year forward return on equity view.
‘Continued assets under management growth should produce the operating leverage inherent in asset management businesses. Structural growth in the UK market and improvements made to the distribution network should aid profitability,’ the analysts said.
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