Broker tips: Hargreaves Lansdown, Ashmore, Jupiter Fund Management, Pets At Home
Analysts at JP Morgan trimmed their target prices for three of the UK's largest 'asset gatherers' to reflect "subdued" net flows over the third quarter.
The investment bank's analysts, who had a 'neutral' recommendation for Ashmore Group, Jupiter Fund Management and Schroders, marked down their targets from 485.0p, 390.0p and 3,000.0p to 450.0p, 360.0p and 2,950.0p, respectively.
With the exception of Amundi and DWS, their channel checks had revealed that the majority of firms in the space had seen net outflows over the three months to September.
Indeed, in both the States and Europe, the dominant note over the quarter were net inflows, helped by passive funds and active money market funds.
In the UK on the other hand, the mutual fund market saw its fifth quarter of outflows in a row.
"And we would be cautious on the near-term UK flow outlook as political uncertainty persists," they said.
"Flow momentum in the UK has been particularly subdued relative to Europe, reflecting ongoing political uncertainty, and may continue to weigh on sentiment surrounding the UK-listed asset managers."
However, Hargreaves Lansdown was kept at 'underweight' as the weak market backdrop in the UK and investor sentiment were unlikely to generate earnings upgrades short-term, while over the medium-term, competitive pressure might weigh on revenue margins.
Analysts at Berenberg raised their price target on British pet supplies retailer Pets At Home from 175p to 210p on Wednesday, noting there was still plenty of investor interest in its turnaround story.
Between 2015 and 2018, Pets at Home shares declined roughly 60%, while earnings forecasts for 2018 fell 30%. Management flagged the group's main historical problems as being retail pricing that became too high, a rapid veterinary roll-out, which distracted from the task of helping existing practices mature, and management churn, which made addressing those issues more difficult.
However, after like-for-like sales growth turned negative in the third quarter of 2017, PAH began making a "significant investment" in reducing prices and Berenberg pointed out that trend like-for-likes sales growth had improved consistently since then, reaching 8.2% in the first quarter of 2020.
"While some prices remain higher than peers, for the products management deems most important (predominantly, but not exclusively, large bags of food) Pets is either the same price or cheaper than online competitors'," said the German bank.
Looking forward, Berenberg said Pets At Home's retail store count was unlikely to grow from its 450 sites today – although it noted that the format was "likely to evolve", in line with its five trial refurbishments
On the veterinary side of the business, a joint-venture model where PAH provides business support services in exchange for a
percentage of revenues, the firm has bought back 55 struggling practices from partners and closed 35 of them. It has also provided temporary support to help struggling partners pay off bank loans and improved cross-selling practices with retail customers to help JVP businesses mature.
However, PAH still believes 700 first opinion vets was achievable, up from 440, but has effectively paused the roll-out for now, with its focus on maturing its existing practices.
"In FY20, those changes will weigh on vet group earnings and cash, although management expects a return to growth from FY21," said Berenberg.