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18 Jan 2022 | 09:54

Berenberg on raises target price on St James's Place

(Sharecast News) - Analysts at Berenberg raised their target price on wealth manager St James's Place from 1,348.0p to 1,900.0p on Tuesday despite the firm having already outperformed the UK FTSE-350 financials index by 50% since the Covid-19-induced trough in 2020. Berenberg believes that St James's Place's model, characterised by high retention, low price elasticity and exceptionally low flow volatility relative to the market, was well placed to benefit from continued structural-flow tailwinds.

The German bank, which reiterated its 'buy' rating on the stock, stated these prospects were further supported by SJP's "unique" funds under management structure, in which gestation FuM that currently drives no recurring revenue will likely be responsible for over 80% of the firm's expected growth in revenue over the next four years.

"This provides strong visibility on medium-term earnings growth," said Berenberg. "Trading at a discount to its long-run average P/E and FuM multiples, we think that SJP's 18.9x one year forward P/E - for a 16% 2021-25 EPS CAGR - is compelling."

"SJP trades at a 15-20% discount to consensus long-run average P/E multiples - on 18.9x and 16.8x respective one- and two-year forward cash earnings, and a 15% discount to its long-run market cap to FuM. Structural flow tailwinds, continued high retention and higher relative earnings visibility underpin our 16% EPS CAGR from 2021-2025, and outline SJP as undervalued, particularly when compared to other UK wealth names."
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