Abrdn contemplates a troubled future

While it might be quietly satisfying to think that the punishing fall in Abrdn’s (ABDN) share price since August last year is a fitting commentary on the company’s – surprisingly difficult to spell – corporate rebrand, the reality is that despite going big with the purchase of interactive investor (ii), the second-largest retail investment platform in the UK, its performance is tied inexorably to the negative sentiment affecting the wider market – or as Abrdn’s chairman described it, “The outlook is not universally bleak.”

The results encapsulated the problem of how difficult it is to use a statement of the past to understand the future. On its own operating terms, Abrdn performed acceptably. Fee-based revenue generated by its long-term mandates was up 6 per cent to £1.51bn and the company benefited from a capital return of £300mn from its stake sale in Phoenix Insurance (PHNX). Even with the cash outflow from the purchase of ii, Abdrn is sitting comfortably on an underlying capital surplus of £1.1bn, or roughly a quarter of its market cap. Assets under management at the period end were £542bn and, while the churn in net flows slowed compared with 2020, these were still £6.2bn for the year.

Abrdn’s shares are now trading at a considerable discount to net asset value. That has produced a wide margin of safety which, despite the uncertain backdrop, introduces a value investment case for the asset manager and we feel happy in upgrading our sell advice. At current levels, Abdrn’s shares trade at forward price/earnings ratio for 2022 of 14, which is roughly mid-range compared with its peers. Hold.

Last IC View: Sell, 298p, 10 Aug 2021