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Jefferies starts Sanne at 'buy', highlights barriers to entry

By Alexander Bueso

Date: Wednesday 12 Feb 2020

Jefferies starts Sanne at 'buy', highlights barriers to entry

(Sharecast News) - Jefferies kicked off its coverage of Sanne with a 'buy' recommendation and 735.0p target price, highlighting to clients the company's improving execution and the attractive fundamentals of the industry in which it operated.
In particular, the company offered investors a way to profit from the trend towards de-equitisation - as public companies are taken over by private equity - and increasing allocations to alternative assets.

The broker put Sanne's addresable market in alternative fund administration services and hedge funds at $6.0-7.0bnm predicting that it would grow at 10.0% a year on the back of an increased regulatory burden in Europe and higher penetration by outsourcers in the States.

It also enjoyed high barriers to entry and clients were "sticky", said Jefferies.

The reason for the latter was that investment funds had 5-10 year durations and the risk of disruption when changing administrators was too great.

And given the fragmented market, particularly in alternative funds, consolidation was "inevitable".

"Sanne's valuation premium evaporated as investment in governance, controls and capacity weighed. As execution improves, we believe the shares can return to the 27x five-year average PE so there is 25% upside to our 735p PT."

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