Aberdeen Asset Management - cashed up and married to a Widow

Aberdeen Asset Management: Aberdeen continues to advance, with the latest step being this year’s debt and equity funded £606.6m acquisition of the SWIP investment arm. This move resulted in AUM jumping 62% to £324.4bn, although this masks underlying significant redemptions from ‘Old Aberdeen’ and ongoing client defections at SWIP. In these results to 30^th September 2014, net revenue was up 4% at £1.12bn, with underlying PBT up 2% at £490.3m. Underlying eps were a slight beat, but were down 4% to 31.1p, whilst the total dividend has been increased by 12.5% to 18p. So, this dividend is almost twice covered (1.7x) by earnings and backed by a cash pile (including c£400m regulatory capital) that grew from £426.6m to £653.9m. Sentiment on emerging markets has worsened as QE tapering in the US developed. For Aberdeen their Asian bias has been a hindrance. SWIP will help even out this imbalance, but will fuzz Aberdeen’s specialist image. This is reflected in the average management fee falling to 41.8 bps, with the second half (so with SWIP fully included) showing a rate of 36.9bps.  The outlook is one of those that can be characterises as cautiously optimistic.

It looks like FY2015 forecasts are settling at 35p and a bit, being growth of 12.5% and putting the shares on 13.2x at 460p. If cover is held at 1.7x, this gives a dividend of 20.6p for a yield of 4.5%. It is not unreasonable to look at similar growth in FY2016 and FY2017 as underlying growth is blended with efficiencies and cost savings at SWIP. Before the SWIP deal the company’s management had been guiding that acquisition led growth was over and that organic progress was favoured. The temptation provided by the SWIP opportunity was too great, but shareholders must be hoping that the dust will now be allowed to settle for at least the 18 months suggested by management. So, whilst capital returns were not mentioned in this release, the assumption must still be that shareholders can expect more cash returns given the strong balance sheet and cash generation. The multiples are no longer compelling but equally are not stretched. Unless you have the glums about equities and emerging markets, then for dividend growth investors, Aberdeen Asst Management still looks like it meets the requirements. (Neil Cumming^, 2^nd December 2014)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower