Citigroup is bullish on the recently merged fund management group Standard Life Aberdeen PLC (LON:SLA), saying it offers “better growth” than Standard Life alone, and “better strategic positioning” than a stand-alone Aberdeen Asset.
Following completion of the two firms’ merger on August 14, the US bank’s analysts have upgraded their rating to ‘buy’ and raised their price target for the stock to 490p from 370p.
READ: Standard Life Aberdeen edges higher on first day of trading after £11bn merger completes
In mid-morning trading today, the FTSE 100-listed firm’s shares were changing hands at 445.2p, up 2%, or 8.9p on the day.
In a note to clients, the Citigroup analysts said: “We see upside driven by cost synergies and recovery in core EM/ APAC equity and GARS franchises.”
They forecast a compound average growth rate in operating profit EPS of 10% for 2016-2020, which they said excluding merger benefits would have been 4%.
The analysts said they also forecast the firm paying a 5p per share special dividend following the expected spin-off of HDFC Life, but sees no capital return even if Standard Life Aberdeen sells its spread/risk book - which they think is “possible but not imperative.”
They added that their ‘Bull/Bear’ target price range for the stock is from 459p to 517p.