Citi retains 'buy' rating on Perpetual as weak Aussie dollar likely to lift AUM
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The news: Citi analysts have retained their price target on investment manager Perpetual citing gains to assets under management from a weaker Australian dollar.
The numbers: The brokerage retained its ‘buy’ rating on Perpetual and price target of $22.50 on the stock, after lifting earnings estimates slightly for FY25 and FY26.
Perpetual shares are up 0.9% to $20.56 in early trading on the ASX.
The context: The analysts retained their outlook on Perpetual despite the company’s proposed sale of its corporate trust and wealth management businesses to KKR now in doubt, because of a substantially higher tax bill from the transaction.
Meanwhile, a weakening Australian dollar in the second quarter is likely to lead to a solid lift in closing assets under management. The corresponding lift in revenue is, however, likely to be partially offset by a rise in expenses, they added. The analysts forecast Perpetual's expense growth to exceed the top end of its 2% to 4% guidance range.
What they said: "With the KKR deal seemingly still live but likely in significant difficulty, we now expect to hear more about Perpetual’s CEO’s belief there is potential to exceed Perpetual’s stated cost reduction plans," the analysts said in a note.
"We still see the combined business as relatively inexpensive even if it turns out that the three businesses stay together."
The source: Citi research
