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SJP shares 'irrationally' undervalued as £100bn asset mark nears

St James’s Place is expected to announce it has passed the £100 billion assets under management mark for the first time, when it makes an interim report next week.

SJP shares 'irrationally' undervalued as £100bn asset mark nears

St James’s Place (SJP) is expected to announce it has passed the £100 billion assets under management mark for the first time, when it makes an interim report next week.

The milestone has been approaching since SJP reported it had hit £96.6 billion in August.

In a note Panmure Gordon said SJP’s shares were trading at a 10% discount to its own EEV forecast of 1168p per share. It said this was ‘completely irrational given the value of the new business machine that is The Partnership’. Its target price is 1657p per share.  This 'reflects the EEV NAV at 30 June of 1,115p plus 4x (or four years' worth) new business net of tax,' it said.

Shares in the company closed 1,039p last night, almost 20% beneath their 52-week high of 1,279.5p.

SJP’s share price has fallen over the past few weeks, attributed by Panmure to recent falls in investment markets. But the analyst said this made SJP ‘an excellent buying opportunity’. 

Panmure has forecast net inflows of £2.6 billion, up 14% on the same period last year. If SJP's assets hot £100 billion as expected, this will be an increase of around £16 billion on last year.

Baillie Gifford Fund manager Milena Mileva was recently challenged on her SJP shareholding after taking over the Baillie Gifford UK Growth investment trust, formerly the Schroder UK Growth.

She was asked whether she supported SJP’s client charges, widely regarded as among the highest in the advice sector. Milever said she said think the level of fees was ‘very high’ and said ‘the level will have to come down over the next 15 years’. Though she added afterwards that She thought SJP did ‘take good care of their clients’ and that ‘the investment returns they deliver from their managers is good.’

SJP’s £100 billion of client money will have been invested through it now segregated fund mandate proposition, whereby external fund managers run mandates exclusively for SJP.  SJP takes a significant cut of the earnings from those funds, as detailed in recent exclusive analysis by Citywire

Overall SJP earns four times as much as the managers actually running the funds, even hitting as much s 38 times on one fund.

SJP said its income pays for ‘all elements of our service'. 'This includes ongoing advice charges, all administration costs that would be covered by a platform charge elsewhere and the costs of running the fund infrastructure. The amount paid to the investment manager covers their fees for running the investment mandate we give them.'

The analyst referred to recent reports there could be a cut to pension tax relief in the coming Autumn Budget.

However, it did not think this would harm SJP’s performance, but in fact give it a boost, on the basis that more people would seek advice on their pensions generally. Should the chancellor reduce the annual allowance from £40,000 to £30,000 ‘we suspect that this will only serve to increase demand for SJP’s advice services.’

Click here to read our exclusive SJP research

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