What's new
■ Strong fourth-quarter sales
■ Robust fund net inflows
■ Shares soar a quarter in six weeks
Life assurer and wealth manager St James's Place (STJ) continues to bound ahead. Its fourth-quarter figures revealed that new business volumes had jumped by an impressive 20 per cent year on year, while funds under management rose 27 per cent to £44.3bn.
Sales growth remains focused on the group's proprietary investment product offering, for which new business soared 35 per cent in 2013. Pension product sales remained roughly flat at £283m for the year, while protection product sales fell 11 per cent to £2.4m (a small change compared with total new business of £763m). Funds under management, meanwhile, were swelled by a £4.3bn net fund inflow during the year - a 28 per cent rise on the 2012 figure. Over five years, "funds under management have grown by a compound 22 per cent per annum compared with growth in the FTSE 100 of 8.8 per cent", noted chief executive David Bellamy.
St James's progress has also been supported by rising recruitment into the St James's Partnership, which effectively acts as an additional sales force for the group. Partnership numbers rose 9.5 per cent to 1,958, mainly reflecting the impact of the Retail Distribution Review. That banned commission payments, forcing many independent financial advisers out of business and into the hands of St James's.
Numis Securities says...
Hold. St James's is Britain's third-largest wealth manager, but has only a 4-6 per cent share of a very fragmented market. That means there's capacity to continue growing market share in a market that is also growing. Given expected annual embedded value growth of around 10 per cent between 2014 and 2016, plus a dividend yield of 2.5-3.5 per cent, the shares offer reasonable total returns. But with the shares already trading on 1.37 times forecast embedded value for December 2013 of 576p, there's little to no scope for a further re-rating. After a very strong share-price run, we downgrade from add to hold and keep our price target unchanged at 805p. Expect end-2013 EPS of 28.8p, rising to 37p for end-2014.
Deutsche Bank says...
Buy. The figures revealed annual sales growth in line with management's target of 15-20 per cent. Our instinct is that actual sales will be towards the lower end of this range, although there's scope for a modest EPS uplift (by 2 per cent for 2015 to 44p). After the strength of the share-price performance, we see the fourth-quarter performance as supportive of the shares rather than as a justification for driving them materially higher in the near term. However, given the structural long-term potential for the group, and our positive view on equity markets - which would imply a further 10 per cent uplift to 2015's forecasts - we remain buyers. Our price target is 810p.
