Growth continues for St James's

Third-quarter figures this month from life assurer and fund manager St James's Place (STJ) revealed yet more solid progress. Indeed, total new business sales (on an annual premium equivalent basis) jumped 23 per cent year-on-year and the group’s embedded value per share reach 540p - up from 524p at the half-year stage.

The group’s investment side performed especially strongly with new business sales there having jumped 50 per cent on the year, while protection-related new business sales rose 9 per cent. Pension business did slip though with new business sales falling 4 per cent in the three-month period. But the group’s funds under management, at £41.8bn, rose sharply - up 5 per cent in the quarter and up 20 per cent in the past year. St James’s reported a net inflow of funds of £1.03bn - compared with a £0.75bn net inflow at this stage a year earlier.

That progress partly reflects improved investment conditions - management point out, for instance, that the FTSE 100 index rose over 4 per cent in the third quarter. But it also reflects structural changes, such as the implementation of the Retail Distribution Review (RDR). The RDR has banned commission payments, which has forced many independent financial advisers out of business - that, in turn, has boosted recruitment into the St James’s Partnership.

Numis Securities says...

Add. Third-quarter sales were 5 per cent ahead of our estimate and at the top end of the consensus range. But with the shares trading on 1.25 times embedded value there is little scope for a rerating. That said, there is still potential for reasonable positive shareholder returns - given robust forecast embedded value growth over the next three years and decent prospective dividend yields during that time. If the current price to embedded value rating is maintained, this implies full-year 2014/2015 total shareholder return of around 13 to 14 per cent. In summary, the shares offer growth and income at a reasonable price. Expect full-year EPS of 28.6p, a dividend of 16p a share and a year-end embedded value of 562p.

JP Morgan Cazenove says...

Overweight. St James’s Place reported yet another strong set of numbers at the third-quarter stage - new business sales beat out estimates by 9 per cent and embedded value per share came in 1.5 per cent ahead of our forecast. Based on an average of three valuation methods, we have raised our price target by 9 per cent to 724p. These methods include an embedded value based approach, a discounted cashflow valuation and a return on equity to cost of equity analysis. Overall, and trading on 1.25 times the third quarter’s reported embedded value, we see the shares as attractive - that rating doesn’t reflect growth in new business. Moreover, the group is well placed to benefit from market changes in the UK - especially from the RDR. Expect full-year adjusted EPS of 34.3p.