HSBC upgraded its stance on shares of M&G and St James’s Place on Tuesday as it took a look at UK wealth managers.
The bank said that following “underwhelming” performances in the last 12 months, current share price levels for asset managers are now attractive. “But it is the total capital returns or growth on offer that are most appealing, in our view,” it said.
HBSC lifted both M&G and SJP to ‘buy’ from ‘hold’. It upped its price target on M&G to 260p from 220p and cut the target on SJP to 1,600p from 1,650p.
“We see M&G offering very attractive total capital return yields at an average of 20% per annum over 2022-24, which correspond to the group returning circa 60% of its market cap to shareholders over three years,” HSBC said.
“Although we expect limited growth in nominal operating earnings and capital generation, our forecast share buybacks mean that on a per share basis we see high-single digit compound annual growth rates in these metrics and dividend per share over the medium term.”
As far as SJP is concerned, HSBC said double-digit growth rates on offer over the medium term are not currently being reflected in its share price. “SJP’s strong brand and the ever-increasing need for financial advice in the UK mean it is well-placed to grow over the medium to long term, in our view,” it said.
HSBC reiterated its ‘buy’ rating on Abrdn but slashed the price target to 255p from 330p as it cut its key long-term growth rate assumption in its valuation methodologies to 2% from 3%, and made other changes to near-term estimates.
“We see Abrdn offering attractive total capital return yields at an average of 14% per annum over 2022-24, which correspond to the group returning circa 40% of its market cap to shareholders in three years,” it said.