JP Morgan positive on Standard Life Aberdeen, but lowers target

JP Morgan argued in favour of patience on the part of investors in Standard Life Aberdeen, saying that recent management initiatives had succeeded in unlocking the value in the different parts of the business, leaving the asset management arm undervalued.

The resulting 19.99% stake in Phoenix was valued at £1.0bn, its investment in HDFC Life at £3.1bn and that in HDFC AM at £1.3bn.

Together with a £1.75bn share buyback, combined the above were worth the equivalent of about 75.0% of Standard Life's then current market value, leaving the Aberdeen Standard Investments asset management arm trading at an implied price-to-earnings multiple of just 5.0.

That, said analysts Gurjit S Kambo and James Goulbourne, represented a 60.0% discount to its asset management peers.

"While we accept that ASI has struggled to turn around net flows in core strategies, gross inflows have been more diversified and management is actively managing costs to cushion the earnings impact, which should help support dividends and, hence, reward investors who wait for a flow recovery," they said.

Furthermore, they said the firm remained "well-positioned" to benefit from structural growth in the UK pensions market, having held on to its retail platform business and via its strategic partnership and 20% stake in Phoenix.

Nevertheless, while they reiterated their 'overweight' stance on the company's shares, following the lifting of a period of restriction, they did lower their target price from 500.0p to 425.0p.