Aberdeen AuM holds steady despite economic turmoil
Aberdeen Asset Management's trading update is well received, prompting analysts to raises earnings estimates
Aberdeen Asset Management’s interim management statement was well received this morning, prompting a number of analysts to raise estimates and upgrade recommendations on the stock and sending the shares 4% higher in early deals.
Assets under management (AuM) for the three months to 31 December 2008 came in at £110.2 billion, virtually unchanged from September’s figure of £111.1 billion, which Aberdeen said is a tribute to the diversity and scale of the business.
However, uncertainty surrounding the outlook for global economies and markets continues to weigh on investors' decisions and the group reported net outflows for the quarter of £5.0 billion. Gross new business wins fell to £2.6 billion from £5.2 billion in the previous year, while assets withdrawn by clients rose to £7.6 billion versus £5.1 billion.
Martin Gilbert, Chief Executive of Aberdeen, commented: “We are reducing our cost base in response to the weak market environment, while our plans to acquire certain businesses from Credit Suisse are progressing well. Underpinning all this is our continued performance in many areas, including emerging markets and global equities.
Aberdeen remains confident that it has the financial strength, a strong range of core products and a diversified client base to weather the current turbulent environment and on which to build once investor confidence returns.
Responding to the trading update, Jason Streets, analyst at Evolution Securities, said the £5.0 billion of net outflows came largely from the business’s underperforming fixed income business and returns were boosted by foreign exchange gains. The analyst added that property returns appear to have grown by around 9% – a return only enjoyed by sterling investors, while equity returns are said to be ahead of benchmarks – driven by Asian performance in particular.
Streets said Aberdeen’s defensive characteristics were on show during the quarter, but added that the story here is more about acquisitions. Evolution Securities remains sceptical about buying large underperforming businesses in asset management, however earnings enhancing they may be initially.
The analyst forecasts full-year 2009 earnings per share of 8.3p for the group, rising to 13.4p in 2010 to reflect the enhancement from the Credit Suisse acquisitions, but Streets sees substantial risk from these purchases as the assets acquired have been experiencing outflows and have been underperforming benchmarks.
The broker today upgraded its recommendation to Reduce from Sell as Aberdeen’s share price hovers around Evolution’s 120p target price. Similarly, Altium Securities raised its trading recommendation to Neutral and said it is likely to increase forecasts following the company’s conference call.
At 9.20am, Aberdeen shares were 4.5p ahead at 120.5p, helping the FTSE 250 index to take on 89.17 points at 6,248.67.
