Berenberg downgraded abrdn on Wednesday to ‘hold’ from ‘buy’ and cut the price target to 260p from 285p.
The bank said abrdn shares have disappointed in recent years, underperforming the UK index by 50% since December 2017 and 27% since December 2020.
The recent acquisition of Interactive Investor(ii) is supportive of long-term growth and Berenberg reckons the rationale for cross-selling investment advice is sound. “However, we expect investors to remain sceptical about the growth outlook for the core investment management business,” it said.
Berenberg said that if abrdn used the £1.5bn paid for ii to buy back shares, it would be 40% EPS accretive.
“Without meaningful buybacks, investors may question whether the core business can deliver long-term growth. This could be funded with further sales of the Indian stakes (now worth £1.2bn), but we expect bolt-on acquisitions may be prioritised,” it said.
Berenberg also argued that abrdn is underexposed to exchange-traded funds (ETFs). “Large-scale asset managers should embrace growth in passive investing, in our view,” it said. “Amundi’s low-cost model is ideally suited to this business, and the acquisition of Lyxor brings meaningful scale. Scale is key, but abrdn is underexposed.”
