Morgan Stanley upgrades Insignia Financial on takeover interest
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The news: Morgan Stanley analysts have upgraded their rating and price target for Insignia Financial citing competitive strategic interest in the wealth manager.
The numbers: The brokerage changed its rating on the stock to ‘equal weight’ from ‘underweight’ and lifted its price target by two-thirds to $4.40 a share.
Insignia shares are trading 0.4% lower at $4.09 in early trading on the ASX.
The context: The change in view comes after Insignia received a $2.9 billion takeover proposal from US-based private equity firm CC Capital Partners, after last month rejecting a bid by rival suitor Bain Capital.
They noted longer-term potential for Insignia was its ability to establish a profitable footprint in a wealth landscape vacated by the banks. However, they argued that for now, the wealth manager’s revenue margins are falling and the prolonged costly complexity of integrating two bank wealth businesses is causing a big disconnect between reported and underlying earnings.
What they said: “We upgrade Insignia Financial to equal weight given strategic interest from several parties and stronger underlying earnings momentum from rising markets. But large below the line transformation costs weigh on statutory earnings and mean the dividend is likely to remain on pause until FY27E,” Morgan Stanley analysts said in a note.
The source: Morgan Stanley research
