Aberdeen Asset denies reports, shares deny outflow reality
Ken Odeluga October 26, 2015 3:00 PM
<p>Emerging markets-focused Aberdeen Asset Management Plc. is most definitely not looking for a buyer, got that? And since, according to founder Martin Gilbert’s newspaper denials […]</p>
Emerging markets-focused Aberdeen Asset Management Plc. is most definitely not looking for a buyer, got that?
And since, according to founder Martin Gilbert’s newspaper denials on Monday, there is ‘no need’ to sell, reports claiming that Aberdeen “is in deep trouble” are false, perhaps even a bit malicious too.
AAM’s shares clambered as much as 7% higher earlier, after the Financial Times suggested it had begun tentative discussions with a number of parties to find a buyer.
The shares then retreated after a spokesman told the press that “in his 32 years running Aberdeen, Martin Gilbert has never approached anyone, formally or informally, and about buying the business”.
It was not an entirely categorical denial.
However, it ought to be categorical enough to remind the market that the firm lost almost half its market value between April and late September, amid relentless outflows.
Investors called in about £10bn in three months to the end of June, giving AAM its ninth consecutive quarter of fund outflows.
An unfortunate knock-on effect for asset managers that focus on emerging markets, like AAM, is that they have borne the brunt of retrenchment from those markets, in anticipation of an era-ending Federal Reserve interest rate rise.
Outflows vs. buy-out hopes
AAM’s all but outright denial about a potential disposal is an alert that such outflows are still the most sensitive aspect of its survival.
The firm’s dismissal of the press talk suggests discussions, if they exist, were (are?) also at a sensitive, fragile stage.
Consequently, my view is that Monday’s reports do not fire the starting gun for a potential AAM re-rating.
Instead, there’s a risk that the de-rating that began in the summer could continue.
Note that the market’s working assumption is that AAM will grow moderately faster than close EM-facing rival Ashmore.
AAM’s current price/earnings ratio is 15.44 times, using trailing 12-month EPS.
Ashmore’s equates to 14.44.
At the same time, forward PEs using forecasts of forthcoming full-year earnings give 12.11 times for AAM against Ashmore’s 18.28.
If there’s no buy-out before the Scotland-based group’s full-year earnings on 30th November, its shares, which bounced 21% from September lows up to last Friday’s close, are likely to resume their EM-related sell-off.
Monday’s, in my view, premature escalation of that bounce, has taken the stock within c. 9p of the gap on 23rd July, the date of AAM’s last assets under management update.
If, as we suspect, a buy-out is far from imminent, a similar gap under Monday’s trading will also turn out to be an issue.
In the latter case, it’ll probably be resolved sooner than the one overhead.
The 7th-23rd October consolidation zone might delay any backsliding—its upper boundary coheres with the 100-day moving average (lilac-coloured line) and lower levels with the 50-day MA (yellow).
There’s another band of support between 300p-307p.
Under that, the stock would face a return to a descending channel that prevailed since the spring.
Please click image to enlarge
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