JPMorgan upgrades St James's Place, Quilter to 'overweight'

(Sharecast News) - JPMorgan Cazenove upgraded St James's Place and Quilter to 'overweight' from 'neutral' on Monday as it took a look at UK wealth managers. "After a very challenging period for UK wealth managers, we believe that the combination of improving flows, high earnings per share growth, and fading regulatory headwinds will lead to improving sentiment and positive share price performance," JMP said.

The bank lifted its price target for Quilter to 135p from 102p. It estimated that the company's redress provision should be fairly limited and one-off in nature.

"Whilst it might lead to an initial negative reaction, it could also constitute a clearing event and shift the focus on fundamentals, with improving flow momentum (+40%/16% YoY growth in net flows in 1Q24 from the restricted/IFA channel), 14% 2023-26e EPS compound annual growth rate and discounted valuation at just 11x FY25e (25% discount to the average of European platforms)," it said.

JPM also said it sees upside risk to earnings from the ongoing cost reduction programme, given Quilter's track record in over-delivering on previous simplification initiatives.

JPM upped its price target on St James's Place to 730p from 637p, citing an attractive valuation and reducing uncertainty.

"Whilst we believe that negative news is largely behind us, this has not been reflected in valuation, with St James's Place trading at 7x FY25e," it said. "We expect that sentiment will improve given the resilience in gross flows, and we see upside to consensus net flow estimates."

It estimated that EPS growth will accelerate significantly beyond 2025, when the new pricing structure becomes effective and said this should be supportive for the valuation.

JPM also noted that despite the recent major headwinds, St James' s Place continued to grow assets under management and advisers, and remains by far the largest wealth manager in the UK.

At 0940 BST, St James's Place shares were up 4.4% at 521.50p, while Quilter was 5% higher at 123.73p.