Citi double-downgrades Man Group shares to sell
Analysts at Citi took a knife to their recommendation and estimates for shares of Man Group.
Financial Services
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16:40 08/05/24
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Man Group
261.60p
16:45 08/05/24
The -13% performance of the company's AHL fund since mid-February was described as "a particular disappointment".
As a result, the broker tore up its previous forecasts for Man's earnings per share in 2016 and 2017, cutting them by between 35% to 40% to stand between 31% and 38% below consensus forecasts.
Even after those revisions, Citi judged the shares to be "fully valued" given how they were trading at a price-to-earnings multiple 17.3 times the broker's profit forecast for 2016.
That P/E multiple compared unfavourably with the shares' 10-year average multiple of 14.3.
Without AHL, the fund manager's performance fee generation ability "looks challenged", Citi analysts Haley A. Tam and Owen E. Jones said in a research report sent to clients.
That was also the main driver behind their decision to slash their estimate for the company's profit before tax performance-fee forecast from $181, to $64m.
In turn, that revision drove their 2016 forecast for profits before tax down by 35% from $361m.
Man's best option for solving "fundamentally subdued" funds under management and improving its outlook for earnings growth at its main franchises was to pursue acquistions.
To that end, the company had about $500m of surplus capital on hand and no share buy-backs were planned for 2016.
"But we see execution as unlikely," the analysts added.
Citi double-downgraded the shares to a 'sell' (from 'buy') and placed a 120p target price on the shares, down from 182p beforehand.