The Aberdeen share strongly underperformed in 2015, down 33% versus the average UK Asset Manager in the bank’s coverage universe +16%, according to Barclays.
But, it is of the view that the firm’s troubles are not only related to emerging markets. “It is tempting to view the shares as solely a macro call on emerging market sentiment. However, we highlight that significant other areas remain vulnerable to outflow risk,” it said in a note.
These areas include the underperforming Global Equities desk which has seen outflows of £6bn, high yield fixed income, the SWIP life book and the Multi-Asset area of Aberdeen Solutions which saw outflows of £7bn. Barclays forecasts a slowing of group outflows to £20bn in full year 2016, from £34bn in full year 2015, but believes the “risks are to the downside”.
In total Barclays identifies £191bn, or two-thirds, of Aberdeen’s stock of assets under management as “concentrated in areas of significant outflows in 2015,” while sentiment into 2016 still appears negative.
While Aberdeen has been at pains to emphasise the steps taken to diversify its business away from Asian and emerging markets, its shares fell 4.6% at the end of November after it released full year numbers that came in below analysts’ expectations.
The larger-than-expected net outflows of £33.9bn over the year were largely due to weak sentiment toward Asia and emerging markets, and expected outflows from closed life books managed for insurers. Shares also dropped 6.6% in July following £9.9bn in net outflows in the quarter to end June 2015, “as institutional investors continue to reduce exposure to Asia and emerging markets equities.”
Barclays projects revenue declines of 13% year-on-year, due to Aberdeen’s significantly lower asset base in 2016 year-on-year. Meanwhile, the share is trading at 12.6x calendar 2016 price-to-earnings for a projected 25% decline in earnings per share year-on-year.
“In the light of this negative earnings momentum and outflow risk, we downgrade the stock to underweight, our new target price moves to 250p from 350p,” said Barclays.
