Standard Life Aberdeen shares could rally ahead of H1 earnings

The Edinburgh-headquartered asset manager will unveil its half-year results on Friday 7 August, with outgoing vice-chairman Martin Gilbert hinting at further M&A under new CEO Stephen Bird.

Standard Life Aberdeen (SLA) will unveil its half-year (H1) earnings on Friday 7 August, with the asset manager seeing its profits hit by the economic impact of the coronavirus pandemic.

One path for growth could be M&A, according to outgoing vice-chairman Martin Gilbert, with the asset manager well-positioned to capitalise on potential targets under new CEO Stephen Bird.

‘The strength of the balance sheet is incredible. It's one of the things that probably attracted Stephen to the business,’ Gilbert told Financial News in an interview.

‘[Stephen] has the strength of the balance sheet to build whatever he wants. I don’t think he’s taken the job to stand still. He’s taken the job to build the business,’ he added.

Consolidation within the asset management sector is rife, with SLA forming after Standard Life merged with Aberdeen Asset Management in 2017.

Declines in valuations amid the Covid-19 crisis could lead to opportunties for larger players to gobble up smaller competitors or even drive larger deals, according to a recent report on asset management M&A in the Covid-19 era by Mayer Brown.

‘Asset managers with fundamentally sound businesses and investment strategies are still inherently valuable, but market turmoil and uncertainty about when AUM and revenues will recover may lead to a downward adjustment of valuation multiples for these businesses,' the report said.

‘That, in turn, could generate renewed momentum in deal activity in the sector,’ it added.

Standard Life Aberdeen: outlook for 2020

Despite the obvious challenges the firm faces, it boasts a strong balance sheet and capital generation potential capable of returning value to shareholders.

‘The outlook for the markets and our industry in 2020 is turbulent with the additional complexity of Covid-19,’ SLA CEO Keith Skeoch said.

‘Importantly we are focused on what we can control, namely delivering for our clients, customers, colleagues and shareholders; diversifying our revenues; investing for the future and maintaining financial discipline,’ he added.

SLA managed to maintain a healthy dividend amid all the market turmoil, confirming a final dividend of 14.3p (FY19 dividend of 21.6p) at the end of March. Investors will be interested to see if the asset manager will be able to do the same in 2020.

Barclays downgrades Standard Life Aberdeen ahead of H1 earnings

Ahead of what is likely to be a disappointing set of H1 result on Friday, analysts at Barclays have downgraded SLA to ‘underweight’ and given a target price of 240p for the stock, implying a potential downside of -9%.

SLA closed at 264p per share on Wednesday, with the stock down 21% year-to-date.

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