Standard Life should "re-rate upwards" after Canadian deal, says Deutsche Bank
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The bank kept a 'buy' rating for the insurance stock and lifted its target price by 6% from 428p to 455p.
"In addition to the high price achieved, we see the deal as strongly positive for SL, marking an exit from a slow growing, capital-intensive, spread-based business and leaving the group more focused on fee-based revenues."
The two companies have also signed a collaboration agreement in principle for Manulife to distribute SL Investments' products via the Canadian company's network in Canada, the US and Asia.
The relationship is expected to treble SL Investments' assets under management (AuM) distributed by Manulife within three years. Deutsche Bank estimates it is worth £7bn of extra AuM.
The bank said the net impact on SL's earnings per share (EPS) from the sale and the deal is relatively small, but the quality of earnings will improve.
"Despite the relatively minor change in EPS, we nonetheless expect the shares to re-rate upwards, reflecting the substantial shift in the group's revenue base towards fee income and higher growth profile."
Standard Life's shares were up 8.6% at 419.1p by 11:45.
BC