Berenberg starts Jupiter Fund Management at 'buy', shares jump

(Sharecast News) - Berenberg initiated coverage of Jupiter Fund Management on Tuesday with a 'buy' rating and 187p price target, saying it expects the company to outperform when a sustained improvement in investor sentiment transpires.

The bank said the "highly accretive, complementary" acquisition of CCLA Investment Management (CCLA) earlier this year added scale and further diversified the company, while flows have turned positive, in contrast to many of Jupiter's peers.

It noted that between 2021 and 2024, Jupiter suffered material net outflows that were only partially offset by positive market movements. Over the last 12 months, however, there has been a clear shift in momentum, with the business reporting net inflows.

"While it remains difficult to predict flows with any kind of certainty, with investor sentiment constantly shifting on geopolitical news, we believe that Jupiter has a diverse, attractive range of funds that should deliver growth," Berenberg said.

The bank also highlighted Jupiter's balance sheet strength and optionality.

"With cash at the end of the first half of £345m (and seed capital of £80m), Jupiter has one of the strongest balance sheets of the listed UK asset managers," it said. "These items account for over 50% of the company's current market cap."

It pointed out that even after the CCLA acquisition, Jupiter still has £173m of surplus capital.

"Looking ahead, our cash-flow estimates suggest that Jupiter will generate £252m of free cash flow over the next three years (based on 'normal' performance fee expectations). This accounts for a further 30% of the market cap."

Berenberg added that while there are cheaper asset managers, few offer the combination of positive flows and a diverse product set.

At 1326 BST, the shares were up 3.5% at 170.20p.