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Canaccord cuts target for Jupiter Fund Management on M&A risk

By Alexander Bueso

Date: Tuesday 11 Feb 2020

Canaccord cuts target for Jupiter Fund Management on M&A risk

(Sharecast News) - Canaccord Genuity cut its target price for shares of Jupiter Fund Management from 415.0p to 362.0p after the firm modified its capital allocation policy to include inorganic growth - before dividends.
The Canadian broker was projecting a payout ratio of 85.0% and 90.0% for 2020 and 2021.

That, analysts Portia Patel and Justin Bates said, was consistent without its historical target range, but now " shareholders must weigh up the value creation from potential accretive M&A against extraordinary distributions."

Since that will depend on the merits of the deals identified by management, at this point in time they could "flag only potential downside risk to our DPS forecasts".

"We value JUP at a 10% discount to the peer average to reflect this risk [resulting in a 2020 price-to-earnings multiple of 14.0], coupled with an uncertain net flow and EPS outlook, which results in a 362p target price, -1% TSR. Maintain HOLD."

Their projections were for flat net flows in 2020 and 3.0% growth in 2021, versus the 5.0% for both years which they had previously anticipated.

Market growth on the other hand was now pegged at 5% for 2020-21, where as previously they had been expecting 0.0% and 5.0% growth.

Furthermore, the analyts lowered their estimates for Jupiter's earnings per share in 2020-21 by 10.0% and 15.0%, respectively, to reflect lower net management fees and reduced scope for cost cutting.


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