On Friday, Deutsche Bank adjusted its price target on shares of Liontrust Asset Management (LIO:LN) to GBP5.35, down from GBP5.50, while retaining a Hold rating on the stock. The revision follows the asset manager's report of assets under management (AuM) and net outflows that were in line with Deutsche Bank's expectations.
Liontrust Asset Management reported an AuM of GBP26.0 billion, closely matching Deutsche Bank's projection of GBP26.1 billion. Net outflows were slightly higher than anticipated, with the actual figure reaching GBP1.1 billion against the forecast of GBP1.0 billion. Since September, the firm has experienced an additional 2% decrease in AuM, including further net outflows of GBP0.2 billion.
The company's management has pointed to the uncertainty surrounding the upcoming UK budget as a contributing factor to the recent pattern of elevated net outflows, particularly affecting sentiment towards UK equity funds. This sentiment is a reflection of broader market concerns and the challenges facing the asset management industry.
Challenges identified by Deutsche Bank for Liontrust include persistent net outflows, a low industry growth outlook, and skepticism about the company's current strategy to reverse the trend of net outflows in the short term. Additionally, there is a perceived risk to the firm's ability to sustain its operating margin in the mid-30s percentage range, considering the current run-rate of AuM, revenue, and costs.
Moreover, Deutsche Bank highlights an increasing risk to Liontrust's dividend, which is not covered by the forecasted management fee earnings per share (EPS) for fiscal years 2025, 2026, and 2027. The dividend may require supplemental support from the company's surplus capital and performance fees to be maintained.
InvestingPro Insights
Adding to Deutsche Bank's analysis, recent data from InvestingPro sheds further light on Liontrust Asset Management's current situation. The company's market capitalization stands at $412.43 million, reflecting its position in the asset management industry.
One of the most striking InvestingPro Tips is that Liontrust pays a significant dividend to shareholders, with a current dividend yield of 14.55%. This aligns with Deutsche Bank's concerns about the sustainability of the dividend, especially given that the company has maintained dividend payments for 12 consecutive years. However, investors should note that the stock has taken a big hit recently, with a 24.89% price decline over the last three months.
Despite these challenges, InvestingPro Tips suggest that net income is expected to grow this year, and analysts predict the company will be profitable. This positive outlook contrasts with the current P/E ratio of -89.91, indicating that the market is pricing in future improvements.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Liontrust Asset Management, providing a deeper understanding of the company's financial health and market position.
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