No Surprises In Henderson Update

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This story features PERPETUAL LIMITED.
For more info SHARE ANALYSIS: PPT
The company is included in ASX200, ASX300 and ALL-ORDS

By Chris Shaw

A recent strong run in the shares of fund manager Henderson Group ((HGI)) has prompted Citi to downgrade the stock to a Hold, the move meaning the FNArena database now shows five Buy ratings and four holds.

The change in Citi’s rating was supported by the group’s interim management statement, which reported on fund flows over the last quarter and was, in the broker’s view, somewhat disappointing from that perspective. On the plus side the broker notes the company is on track to meet earnings guidance, so it has actually lifted its earnings estimates modestly as a result.

Merrill Lynch saw little to suprise it in the update, the broker noting the fund outflows have not been dramatic and performance is broadly in line with that achieved last year. The broker has retained its Buy rating as a result, matching the positive view of JP Morgan who saw the update as indicative the group was actually doing better than it had thought.

As a consequence JPM has lifted its forecasts by 3-5% in coming years, seeing scope for the company to offset the slower fund flows with lower costs across its business. ABN Amro also pointed to the group’s cost flexibility as a positive, though it rates the stock as a Hold at current levels as on analyst numbers the stock is trading at fair value.

Macquarie agrees and saw no reason to adjust its forecasts after the update, though it points out earnings risk is to the upside as management’s guidance is based on the UK’s FTSE Index trading at around 5,700 points compared to current levels for the index of just over 6,200. While the broker retains its Neutral rating it does list the stock as its top preference in the funds management space, ahead of Perpetual ((PPT)) and BT Investment ((BTT)).

With few changes to earnings estimates post the update there has been little change in terms of the average price target for the stock, which the database shows is currently $2.79, down from $2.82 prior to the update. This compares to a share price today of $2.77, down 1c as at 12.00pm. Henderson Group’s trading range over the past 12 months is $1.90 to $4.29.

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