Broker tips: St James’s Place, RS Group, Lancashire Holdings

The analysts of Berenberg lowered their price target on Wealth Manager St. James Square from 1,500.0p to 1,365.0p on Monday but remained positive across the group.

Berenberg said St James’s Place was “well positioned” to benefit from structural growth tailwinds, supported by high retention, low customer price elasticity, low net-flow volatility and better prospects for relative revenue growth. advisers.

The German bank, which also reiterated its “buy” rating on the stock, noted that SJP’s recent net flow performance has helped highlight a model that can “better weather declining consumer confidence.” and a “more challenging economic environment” compared to some of its peers, due to its “more resilient customer base and product set.”

“While the short-term sentiment may remain in question given that SJP is materially exposed to the markets, we believe the long-term thesis remains unchanged. This is based on greater participation in the pension and investment market and on the unraveling of suboptimal consumption of financial advice,” the analysts said. .

Berenberg cut its earnings per share estimate on the stock by 9%, largely due to market performance.

JPMorgan Cazenove downgraded RS Group on Monday to “underweight” from “neutral” and cut its share price target to 820.0p from 1,050.0p after the company’s first-half results last week.

JPM said the downgrade was driven by a combination of a deteriorating macro outlook as RS Group continues to invest in its cost base, heightened uncertainty following the CEO’s furlough and its preference for more defensive exposure elsewhere in its hedge. business services.

“We had already become relatively more cautious on RS1 and downgraded to neutral last month and although RS1 delivered strong results in the Americas and APAC in the first half (consistent with the view that the first half remained strong ), the year-over-year decline in margins in Europe was a negative surprise,” the bank said.

“This highlighted one of the risks we flagged that RS1 may come under pressure on margins in the near term as it increased its operating expenses ahead of the cycle turn.”

JPM said overall it still sees the business as well-managed and with a solid medium-term strategy, but expects a better entry point going forward.

The analysts of RBC Capital Markets raised their price target on insurance and reinsurance companies Lancashire Farms from 550.0p to 600.0p on Monday after an update in year-to-date trading from the group.

RBC Capital said it expects net income of $42.0m for Lancashire in 2022, up from previous estimates of $22.0m – due to lower-than-expected natural disaster losses apart from Hurricane Ian and, to a lesser extent, stronger growth.

For 2023-2024, RBC raised its estimates by 6-7%, mainly due to stronger growth, reflecting “the tougher ratings environment”, while its combined ratios remained roughly unchanged at 79. %/77%.

“LRE’s high share of cat activity makes it more biased towards trends in cat losses, an area of ​​high uncertainty due to the experience of recent years. The current assessment, however, appears to have over-discounted that, and we see good value at current accounting multiples,” said RBC, which also reiterated its “outperform” rating on the stock.

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