St James‘s Place PLC: Positive update, with surprise share buyback

Research evidence excerpt

St James‘s Place PLC: Positive update, with surprise share buyback

Forecast returns

Forecast price appreciation 41.0%

Forecast dividend yield 2.5%

Forecast stock return 43.5%

Market return assumption 9.1%

Forecast excess return 34.4%

Company Description

St. James's Place is a FTSE 100 wealth manager, specialising in the provision of financial

products and advice to individuals, trustees and businesses in the UK. The group provides a

range of insurance, investment and other wealth management services through its life and

unit trust divisions. Central to the business model is an exclusive advisory division, the St.

James's Place Partnership, providing face-to-face financial advice to its clients across the UK.

Valuation Method and Risk Statement

Investors in insurance companies are exposed to a wide variety of risks including: regulatory

and taxation changes, investment returns below expectations, the presence of guarantees in

policies, explicit or otherwise, debt or default risk, fluctuations, regulatory risks and

movements in exchange rates. They are also exposed to accounting changes, reserving risk,

general economic conditions and M&A, which could be positive or negative for shareholders.

SJP: the main negative risk to our earnings forecasts and target prices is a decline in the level

of global stock markets. In addition, any deterioration in investment performance could hit

company net fund flows and performance fees. There is a risk of value erosion if excess cash

were spent on an over-priced deal, or if management failed to successfully integrate an

acquisition. Against this, there could be upside risk to our price target if stronger equity

market appreciation, fund flows or performance fees led to higher-than-expected earnings.