St James's Place PLC (LON:STJ) shares have been upgraded to ‘buy’ by Deutsche Bank as it takes a more optimistic stance on the wealth management group’s five-year plan.
When the FTSE 100 company first announced its five-year ambition in February, the Deutsche analysts said one of the main concerns was the limited longer-term visibility around its new financial target.
But having now heard from management in more detail at a recent capital markets day, the analysts said they are now taking a more positive stance.
This includes forecasting that the 10% annual growth target for gross fund flows out to 2025 “could even be exceeded – and could be sustained beyond 2025 as well”.
This is a lower top-line growth rate than SJP has historically achieved, with the analysts arguing that “the combination of this with only 5% p.a. controllable expense growth over the same period implies the bottom-line growing in excess of 12% per annum – and sustainably so”.
With the shares trading 20% below their 10-year average rating, relative to funds under management, Deutsche lifted its recommendation to ‘buy’ from ‘hold’ with its share price target hiked to 1620p from 1440p.