Berenberg hikes target price on Standard Life Aberdeen
By Iain Gilbert
Date: Tuesday 07 Jul 2020
(Sharecast News) - Analysts at Berenberg raised their target price on global investment company Standard Life Aberdeen from 190.0p to 275.0p on Tuesday, stating that recent management changes held the potential to drive a "change in strategy".
SLA recently announced that an external hire, Stephen Bird, would shortly replace Keith Skeoch, the group's current chief executive officer, meaning that once complete, the firm's senior roles would all be held by people uninvolved in the decision to merge Aberdeen and Standard Life.
That, Berenberg said, increases SLA's flexibility around strategy and capital allocation.
The German bank expects SLA's platform and wealth management activities in the UK to play a larger role in the group's strategy from here - with the company's "Wrap" and "Elevate" platforms, which currently makes a modest contribution to earnings of roughly 6% of pre-tax profits, could be worth as much as 17% of SLA's current market capitalisation when applying the current valuation of listed peers like IntegraFin, AJ Bell and Nucleus.
However, as SLA cautioned in March that the integration of these platforms was proving "more complex" than anticipated, delaying completion until next year, the analysts think there was potential for "significant value creation" but believe the group's new CEO's room to manoeuvre was "limited in the near term".
With internal bandwidth consumed by restructuring and integration activities, management has not been in a position to deploy that optionality in recent years. Rather, the analysts highlighted that this firepower has been spent on maintaining a dividend that they believe is a "long way" from being covered by underlying cash generation.
As the integration nears completion, we think there is potential for SLA's new management team to pivot to a more revenue-focused strategy for growth," said Berenberg, which also reiterated its 'hold' rating on the firm due to SLA's sensitivity to market moves.
"SLA's high operational leverage means that even comparatively modest top-line improvements could yield a significant improvement in earnings, in our view."
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